Why Employers Should Pay Attention to DOJ’s Guidance for Recipients of Federal Funds

As we previously reported, President Trump’s Executive Orders aimed at ending illegal DEI and restoring “biological truth” have left employers wondering what practices the federal government might consider illegal under federal anti-discrimination laws.

In March, EEOC and DOJ jointly published guidance as to the agencies’ position on what “illegal” DEI is. On July 29, the Department of Justice shed further light in a memorandum to all federal agencies titled Guidance For Recipients Of Federal Funding Regarding Unlawful Discrimination.

DOJ’s July memo is primarily directed at federal agencies and at recipients of federal funding (who risk loss of funding if the federal government determines they have engaged in unlawful practices as well as potential False Claims Act (FCA) liability relating to “unlawful DEI.”). However, all private employers subject to federal anti-discrimination laws should take note of the DOJ’s latest memo, which provides concrete examples of the types of practices that may be challenged by federal agencies, for example, in an EEOC investigation.

Below, we break down the takeaways from the DOJ memo and their implications for California employers, who must comply with broader state law anti-discrimination protections in addition to federal law.

DOJ Examples of Unlawful or Potentially Unlawful Practices

The DOJ memorandum provides a non-exhaustive list of unlawful or potentially unlawful practices, categorized into four types of activity, with examples:

• Granting Preferential Treatment Based on Protected Characteristics. Examples include:
  • Prioritizing applicants from underrepresented racial groups for hiring or promotion;
  • Race-based scholarships or programs that exclude qualified applicants of other races;
  • Providing access to facilities or resources based on race or ethnicity, such as safe spaces exclusively for persons of a certain race or ethnic group.
• Using unlawful proxies for protected characteristics. DOJ’s position is that seemingly neutral requirements can be used with the intention of providing preferential treatment to individuals based on protected characteristics.  Examples include:
  • “Cultural competence” or “lived experience” requirements for applicants;
  • Geographical or institutional targeting for recruiting because of their racial or ethnic composition rather than other legitimate factors;
  • Requirements for “overcoming obstacles” or “diversity” statements for applicants.
• Training Programs That Promote Discrimination or Hostile Environments.
  • As an example, DOJ mentions DEI training that includes statements stereotyping individuals based on protected characteristics as "all white people are inherently privileged" or "toxic masculinity."
• Segregation based on a protected characteristic. Examples include:
  • Race-based training sessions, where participants are divided into discussion groups by race.
  • Facilities or resources with an identity-based focus, which may create a perception of segregation;
  • “Diverse Slate” practices, i.e., setting racial benchmarks or mandating demographic representation in candidate pools;
  • Contracting or hiring policies preferring women or minority owned businesses;
  • Fellowship or leadership programs based on race or sex, “even if framed as addressing underrepresentation.”

Potential For Conflicts With California Requirements

In connection with its comments on segregation, the DOJ memo states that failure “to maintain sex-separated athletic competitions and intimate spaces can also violate federal law.” The memo further states, allowing males, including those self-identifying as women, to access single-sex spaces designed for females, such as bathrooms, … undermines the privacy, safety, and equal opportunity of women and girls. According to the DOJ, such policies “risk creating a hostile environment under Title VII.”

In contrast, California’s Fair Employment and Housing (FEHA) regulations require that employers allow employees to use restrooms and locker rooms that correspond to their gender identity, regardless of sex assigned at birth.

California employers should continue to follow California’s more protective regulations to ensure compliance with FEHA, and may need to consult counsel if issues arise.  Also critical is maintaining and enforcing a robust anti-harassment policy, including investigating and responding to concerns and complaints in a manner that is respectful to all involved.

DOJ Recommendations For Best Practices 

DOJ offers several recommendations for best practices, many of which may align with employers’ current practices:

• “Ensure Inclusive Access” to all workplace programs, activities, and resources for all qualified individuals, regardless of protected characteristics.
• “Focus on Skills and Qualifications”
• “Prohibit Demographic-Driven Criteria”
• “Document Legitimate Rationales” for decisions
• “Eliminate Diversity Quotas”
• “Avoid Exclusionary Training”
• “Include Nondiscrimination Clauses in Contracts to Third Parties and Monitor Compliance”
• “Establish Clear Anti-Retaliation Procedures and Create Safe Reporting Mechanisms”
• “Scrutinize Neutral Criteria for Proxy Effects”: i.e., evaluate facially neutral selection criteria to ensure they are not “proxies” for basing a decision on a protected characteristic.

What Should California Employers Do Now? 

Remember that neither agency guidance nor executive orders change federal or state employment laws. Courts are not bound by, and may disagree with, the federal agencies’ guidance. In fact, under recent current US Supreme Court precedent, federal courts are required to provide their own reading of the law rather than defer to agency interpretations.

Employers should continue to review their DEI programs in a thoughtful and nuanced way and in light of federal, state, local, and contractual requirements, including the DOJ Guidance. Employers should continue to follow applicable law and monitor federal developments, consulting counsel as needed, especially if you have concerns relating to your federal grants or contracts.