DOJ Issues Guidance on Federal Contractor DEI Programs
- Ellen Shong & Associates
- Sep 3, 2025
- 3 min read
On July 29, 2025, the U.S. Department of Justice (DOJ) released a document entitled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination.” This document provides information to all entities that receive federal funds regarding the use of diversity, equity, and inclusion (DEI) programs.
The DOJ document released on July 29 is meant to provide guidance to the following types of organizations:
Private sector employers that receive federal funds
Educational institutions that receive federal financial assistance
State and local units of government
The DOJ document references Titles VI and VII of the Civil Rights Act of 1964, Title XI of the Education Amendments of 1972, and the Equal Protection Clause of the Fourteenth Amendment to the Constitution.
DOJ Recommendations on “Best Practices”
DOJ’s document explicitly states that its guidance acts as “non-binding suggestions to help entities comply with federal antidiscrimination laws.” The guidance provides what DOJ suggests are best practices regarding DEI programs but also states that these best practices are “practical recommendations” rather than mandatory requirements.
The best practices that DOJ cites are the following:
Ensure inclusive access
Focus on skills and qualifications
Prohibit demographic-driven criteria
Document legitimate rationales
Scrutinize neutral criteria for proxy effects
Eliminate diversity quotas
Avoid exclusionary training programs
Include nondiscrimination clauses in contracts to third parties and monitor compliance
Establish clear anti-retaliation procedures and create safe reporting mechanisms
Proxy Characteristics
DOJ’s document regarding DEI discusses the use of “unlawful proxies” where an “ostensibly neutral criteria…function as substitutes for explicit consideration of race, sex, or other protected characteristics.” DOJ states that neutral criteria may be unlawful when they correlate with protected classifications or are implemented with an intent to advantage or disadvantage individuals based on protected classifications. As examples of the use of unlawful proxies, DOJ cites cultural competency requirements, geographical or institutional targeting, and “overcoming obstacles” narratives or “diversity statements.”
The discussion regarding “unlawful proxies” is surprising in light of the Trump administration’s rejection of the use of adverse impact theories in regard to employment discrimination. In an adverse impact discrimination claim, a claimant alleges that a neutral criterion has an adverse impact on some protected class. (Adverse impact claims may also be referred to as disparate impact claims.) Executive Order 14281, issued on April 23, 2025, stated that it is “the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible.” DOJ had earlier issued an internal memorandum that narrowed the use of adverse impact theories in evaluating discrimination claims. DOJ’s July 29 guidance appears to allow for some types of adverse impact claims by substituting the term “unlawful proxy” for “adverse impact.”
Trump Administration Position on DEI Initiatives
The DOJ guidance issued on July 29 is part of an ongoing effort by the Trump administration to end DEI programs in the public and private sectors. Along with Executive Order 14281, the administration has released the following documents:
Executive Order 14173, which revoked Executive Order 11246 and prohibited the use of DEI programs in the federal government
Guidance from the Equal Employment Opportunity Commission about the potentially unlawful uses of DEI programs
Guidance from the Department of Education regarding the use of race-based preferences and DEI programs at educational institutions
More information about Trump administration actions regarding DEI and how to understand the differences between DEI programs and equal employment opportunity laws can be found on the Ellen Shong & Associates website in the resources section of the site.
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