DEI Compliance for Federal Funding Recipients
On July 29, 2025, U.S. Attorney General Pam Bondi issued a U.S. Department of Justice (“DOJ”) memo entitled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination” clarifying that federal anti-discrimination laws apply to all programs, including those labeled as Diversity, Equity, and Inclusion (“DEI”) initiatives. If your organization receives federal funding, whether you are a school, nonprofit, government agency, or business partner, you must follow federal laws that prohibit discrimination. According to the DOJ memo, this includes reviewing how DEI programs are designed and implemented.
The following guide will help you understand the key areas the government is focusing on in terms of its application of federal anti-discrimination laws to DEI initiatives and provide practical tips to stay compliant.
The DOJ’s Focus Areas
Federal Funds Come with Strings Attached. Accepting federal money means your organization must comply with civil rights laws such as Title VI (race/national origin), Title VII (employment), Title IX (sex discrimination in education), and the Equal Protection Clause.
Preferential Treatment. The DOJ memo states that organizations that accept federal funds cannot grant opportunities, benefits, or advantages to individuals or groups based on protected characteristics in a way that disadvantages others. This includes initiatives like scholarships or internships reserved for a specific racial group. The memo also discusses proxies (i.e., substitutes that represent something or someone else) for protected characteristics. The memo defines “unlawful proxies” as “ostensibly neutral criteria that function as substitutes for explicit consideration of [protected characteristics].” The memo provides the examples of “cultural competence,” “geographic or institutional targeting,” and narratives about “overcoming obstacles” or “diversity statements,” as potentially unlawful proxies. The takeaway on preferential treatment is that not only are organizations prohibited from overtly considering protected characteristics, but consideration of proxy or substitute characteristics is also prohibited.
Segregation. The memo clarifies that separating people into programs, activities, or resources based on a protected characteristic can also be unlawful. This includes things like training sessions that are restricted to a specific race or gender. At the same time, the memo states that policies requiring individuals to share intimate spaces (like bathrooms or locker rooms) with the opposite sex, or allowing men who identify as women to compete in women’s athletic events, may also be considered unlawful. The memo calls for organizations to “affirm sex-based boundaries rooted in biological differences.” That said, organizations should keep in mind that many state and local anti-discrimination laws require employers to allow employees to use shared facilities, such as bathrooms, that align with their gender identity.
DEI Training Programs May Be Unlawful. The DOJ memo also states that DEI training programs may be unlawful, when the program’s “content, structure, or implementation—stereotype, exclude, or disadvantage individuals based on protected characteristics or create a hostile environment.”
Third-Party Compliance Counts. If your organization receives federal funds, you are responsible for ensuring that your funds are not used to support third-party programs (such as a partner organization) that is not complying with DOJ’s guidance.
No Retaliation. The memo states that employees, students, and others cannot be punished for objecting to policies they reasonably believe are discriminatory or refusing to participate in programs, trainings, or policies that the individual believes violates DOJ’s guidance.
What This Means in Practice
DEI efforts that emphasize inclusion, outreach, training, or equal access are generally compliant. Risks arise when programs focus on protected characteristics or proxies for protected characteristics, such as:
Scholarships, fellowships, or hiring programs open only to one race or gender.
Grant eligibility limited by religion or ethnicity.
Training requirements that penalize people for their personal beliefs.
Safer strategies include race-neutral and gender-neutral approaches, like broad outreach, mentorship programs open to all, and fostering welcoming environments across communities.
Best Practices to Reduce Risk
Audit Your Programs. Review all DEI programs, hiring practices, and training materials to ensure they do not unintentionally exclude or disadvantage individuals based on a protected characteristic.
Focus on Merit. Make decisions for hiring, admissions, and promotions based on specific, measurable skills and qualifications. Document the legitimate reasons for your decisions.
Ensure Inclusive Access. All programs, activities, and resources should be open to all qualified individuals, regardless of protected characteristics they may possess.
Review Third-Party Contracts. If you work with other organizations, include a non-discrimination clause in your contracts and monitor the other organization’s compliance. Also, consistently review the practices of contractors and business partners. You may be accountable for their violations, especially if you provide them with funding.
Protect Against Retaliation. Have clear anti-retaliation policies and a safe way for employees or participants to report concerns without fear of negative consequences.
Seek Legal Help. Consult legal guidance before launching new DEI initiatives tied to federal funding.
Where to Learn More
For organizations that want more details, here are helpful resources:
Title VI of the Civil Rights Act of 1964: prohibits discrimination based on race, color, or national origin in federally funded programs.
Title VII of the Civil Rights Act of 1964: prohibits employment discrimination based on race, sex, religion, or national origin.
Title IX of the Education Amendments of 1972: prohibits sex discrimination in federally funded education programs.
Bottom Line
While DEI is an important goal for many organizations, the rules for federal funding recipients are centered on preventing discrimination. By reviewing your current programs and focusing on merit-based, inclusive practices, you can protect your organization from legal and financial risks. Remember, good intentions should not override federal law.
Author: Emily Harrington, Associate.
This article has been prepared for general informational purposes only and does not constitute advertising, solicitation, or legal advice. If you have questions about a particular matter, please contact Maier Law Group directly.