Employers need to be aware that the U.S. Department of Justice has issued a detailed guidance memorandum about employer diversity, equity and inclusion (DEI) policies that it believes violate policies laid out in a series of executive orders issued by President Trump since taking office in January.
There is nothing new about the Trump Administration’s anti-DEI policy stance, which was made crystal clear during his presidential campaign and in the executive orders he began issuing as soon as he was sworn in. It has been made clear that DEI efforts aimed at establishing privileges for certain groups at the expense of others will not be tolerated.
In introducing the new advice memorandum, Attorney General Pam Bondi states: “In recent years, the federal government has turned a blind eye toward, or even encouraged, various discriminatory practices, seemingly because of their purportedly benign labels, objectives or intentions. No longer.”
The memo is divided into two separate sets of requirements laid out for those employers who are the recipients of federal funds and another set for all other employers. And the policy has teeth. In May, DOJ also announced an aggressive enforcement policy against those it believes are pursuing false claims they have filed under the Civil Rights Act.
Under Trump, the Equal Employment Opportunity Commission (EEOC) also has staked out a position that embraces a jaundiced view of DEI practices. All of this represents a major turnaround from policies that had been enthusiastically embraced by the Biden Administration. In addition, many employers and state governments have continued to support DEI goals and practices.
Some employers have sought to continue pursuing their DEI policies and programs by changing the names and definitions, but DOJ is aware of this practice and appears to be prepared to deal with it, according to Bondi,
She writes, “Entities receiving federal funds, like all other entities subject to federal antidiscrimination laws, must ensure that their programs and activities comply with federal law and do not discriminate on the basis of race, color, national origin, sex, religion or other protected characteristics—no matter the program’s labels, objectives or intentions.”
The memo contains a series of recommendations for what DOJ sees as best practices for employers to follow if they want to stay out of the government’s cross hairs. While characterizing the best practices listed as “non-binding suggestions,” DOJ says they will “assist entities in avoiding legal pitfalls and upholding equal opportunity for all. By prioritizing nondiscrimination, entities can mitigate the legal, financial and reputational risks associated with unlawful DEI practices and fulfill their civil rights obligations.”
Attorneys Andrew Turnbull, Tina Reynolds and Idrian MollanedaIt of the Morrison Foerster law firm observe, “It is important to note that the memo is not legally binding on any organization and does not change the law. Courts will ultimately decide what practices and policies violate federal antidiscrimination laws.”
Which may beg the question of whether any employer wants to end up being a test case for challenging the new criteria.
Although DOJ characterizes the memo as non-binding, the guidance might also be used by federal agencies when making decisions relating to federal contractors and grantees, including whether to terminate existing contracts or grants, the attorneys stress. “Similarly, anti-DEI activists and plaintiff attorneys will likely use the guidance when pursuing discrimination claims,” they note.
What DOJ Expects
The DOJ memo delineates what things employers should look out for that could create liability because they are deemed to be a violation of federal civil rights law prohibitions against discrimination based on legally protected characteristics, such as race, sex, color, national origin or religion.
Legal pitfalls of DEI programs. The use of terms such as “DEI,” “Equity,” or other euphemistic terms does not excuse unlawful discrimination or absolve parties from scrutiny regarding potential violations, DOL states.
Prohibition on protected characteristics as criteria. Using race, sex or other protected characteristics for employment, program participation, resource allocation, or other similar activities, opportunities, or benefits, is considered to be unlawful, except in rare cases where such discrimination satisfies the relevant level of judicial scrutiny.
Importance of sex-separated intimate spaces and athletic competitions. Compelling
employees to share intimate spaces with the opposite sex or allowing men to compete in women’s athletic competitions would typically be considered unlawful under the new standard.
Unlawful proxy discrimination. Facially-neutral criteria (e.g., “cultural competence,” “lived experience,” geographic targeting) that function as proxies for protected characteristics are seen violating federal law if they are designed or applied with the intention of advantaging or disadvantaging individuals based on protected characteristics.
Scrutiny of third-party funding. Recipients of federal funds also are expected to ensure federal funds are not used to support third-party programs that discriminate as well.
Protection against retaliation: Individuals who object to or refuse to participate in discriminatory programs, training activities, or policies are considered to be legally protected from adverse actions like termination or exclusion based on that individual’s opposition to those practices.
Employer Best Practices
To avoid stumbling into any of these legal pitfalls, some of which may not be entirely clear to all business owners and human resources professionals, DOJ also has spelled out some of what employers can do in order to prevent falling afoul of the government’s current interpretation of federal civil rights law.
Ensure inclusive access. All workplace programs, activities and resources should be open to all qualified individuals, regardless of race, sex, or other protected characteristics. Avoid organizing groups or sessions that exclude participants based on protected traits. Some sex separation is necessary where biological differences implicate privacy, safety, or athletic opportunity.
Focus on skills and qualifications. Employers are expected to base their selection decisions on specific, measurable skills and qualifications directly related to job performance or program participation. For example, rather than asking about “cultural competence,” assess specific skills such as language proficiency or relevant educational credentials. Criteria like socioeconomic status, first-generation status or geographic diversity must not be used if to prioritize the selection of individuals based on their racial, sex-based, or other protected characteristics.
Prohibit demographic-driven criteria. Employers also are advised to discontinue any program or policy designed to achieve discriminatory outcomes, even those that use facially-neutral means to accomplish this goal. Intent to influence demographic representation risks violating federal law, DOL stresses. For example, it offers that a scholarship program must not target “underserved geographic areas” or “first-generation students” if those criteria are chosen with the goal of increasing participation by specific racial or sex-based groups. Instead, DOL says you should use universally applicable criteria, such as academic merit or financial hardship, applied without regard to protected characteristics or demographic goals.
Document legitimate rationales. If you are using criteria in hiring, promotions, or selecting contracts that might correlate with protected characteristics, document clear, legitimate rationales unrelated to race, sex, or other protected characteristics. Also, ensure that these rationales are consistently applied and are demonstrably related to legitimate, nondiscriminatory institutional objectives.
Scrutinize neutral criteria for proxy effects. Before implementing facially-neutral criteria, an employer should rigorously evaluate and document whether they serve as proxies for race, sex, or other protected groups. For instance, a program targeting “low-income students” must be applied uniformly without targeting areas or populations to achieve racial or sex-based outcomes.
Eliminate diversity quotas. DOL expects employers to focus solely on nondiscriminatory performance metrics, such as program participation rates or academic outcomes, without reference to race, sex, or other protected traits. And discontinue policies that mandate representation of specific racial, sex-based, or other protected groups in candidate pools, hiring panels, or final selections. For example, DOJ recommends that employers should replace any policy requiring “at least one minority candidate per slate” with a process that evaluates all applicants based on merit.
Avoid exclusionary training programs. Ensure trainings are open to all qualified participants, regardless of protected characteristics. Avoid segregating participants into groups based on race, sex, or other protected characteristics. Trainings should not require participants to affirm specific ideological positions or “confess” to personal biases or privileges based on a protected characteristic.
Include nondiscrimination clauses in contracts to third parties and monitor compliance. DOL urges organizations to incorporate explicit nondiscrimination clauses into grant agreements, contracts, or partnership agreements, requiring third parties to comply with federal law, and specify that federal funds cannot be used for programs that discriminate based on protected characteristics. Monitor third parties that receive federal funds to ensure ongoing compliance, including reviewing program materials, participant feedback and outcomes to identify potential discriminatory practices. Employers should terminate funding for non-compliant programs, DOL states.
Establish clear anti-retaliation procedures and create safe reporting mechanisms. Implement and communicate policies that prohibit retaliation against individuals who engage in protected activities, such as raising concerns, filing complaints, or refusing to participate in potentially discriminatory programs. Include these policies in employee handbooks, student codes of conduct and program guidelines. DOL also urges employers to provide confidential, accessible channels for individuals to report their concerns about unlawful practices.
Why You Should Comply
So far, most of the attorneys who have reviewed the DOL memo and offer their recommendations to employers are encouraging them to comply. To do otherwise could risk very expensive consequences. In addition to enduring the threat of costly litigation by failing to comply, if the government finds you guilty of civil rights law violations, the fines and penalties can run quite high.
The cost threat is even more severe for federal contractors who could be cut off from this source of revenue, including educational institutions like colleges and universities that currently enjoy substantial federal funding for research and other projects undertaken for the government.
In addition, employers running afoul of these policies could experience other high-cost consequences, according to attorneys for the law firm of Morrison Foerster. “Organizations can also face substantial collateral consequences, including potential debarment, reputational damage and private civil suits, including shareholder class actions.”
Federal contractors and organizations receiving federal funds should prepare to see an influx of DOJ enforcement and whistleblower complaints related to alleged violations of federal civil rights laws, the Morrison Foerster attorneys warn.
Robert Holtzman and Justin Ellison, attorneys with the law firm of Herbert, Smith, Freehills and Kramer, believe that the DOJ memo is not legally enforceable because no regulations have been promulgated to implement it. But they admit that employers still face a threat because the memo seeks to interpret long-standing anti-discrimination law.
“As a practical matter, maintaining racial quotas and racial balancing practices has never been legal,” they admit. “Therefore, corporate DEI programs that present the most risk include those that demonstrate a preferential treatment for certain individuals belonging to a protected group.”
Because of this fact, they point out that programs, affinity groups, mentorship opportunities, access to business networks, fellowships, or scholarships open to only minority candidates, employees, contractors and other business partnerships all are vulnerable to possible attack.
Facing the prospect of joint EEOC and DOJ workplace investigations on the horizon, some employers already have commenced internal audits analyzing the relative legal and reputational risks of their existing DEI programs. “At a minimum, employers that have not already done so should evaluate their current DEI policies and strategies to ensure compliance with existing federal, state and local antidiscrimination laws,” Holtzman and Ellison advise.
