Alert for Recipients of Federal Funding: the U.S. Office of the Attorney General Issued a Warning Against Unlawful Discrimination

On July 29, 2025, the U.S. Attorney General issued non-binding guidance to entities receiving federal funding warning there are significant legal risks involved with initiatives such as DEI (Diversity, Equity, and Inclusion) programs, training programs that promote discrimination or hostile environments, implementing protected characteristics as preferential criteria, compelling employees to share intimate spaces with the opposite sex, engaging in proxy discrimination, supporting third-party programs that discriminate, segregation based on protected categories, and retaliating against those who object to or refuse to participate in discriminatory policies or practices.

The guidance is aimed at organizations that receive federal funds such as educational institutions, state and local governments, public employers, federal contractors, healthcare entities, and not-for-profit grant recipients, and declared the “federal government will not stand by while recipients of federal funds engage in discrimination,” referencing a desire to curb discrimination on the basis of race, color, national origin, sex, religion, or other protected characteristics.

This guidance approaches the concept of discrimination from a slightly different perspective than that of the prior administration – a perspective that should be considered when evaluating whether an existing program would be seen as legally complaint by the Attorney General’s office. In other words, past precedent may not provide organizations receiving federal funds the proper context for evaluating their programs.

The guidance provides the following recommendations regarding best practices to avoid legal liability: 

• Ensure Inclusive Access: All workplace programs, activities, and resources should be open to all qualified individuals.
• Merit-Based Decisions: Use clear, job-related criteria for hiring, promotions, and program participation.
• Prohibit Demographic-Driven Criteria: Discontinue any program or policy designed to achieve discriminatory outcomes, even those using facially neutral means.
• Document Legitimate Rationales: Keep records showing that decisions related to hiring, promotions, or selecting contracts are based on legitimate, nondiscriminatory reasons.
• Scrutinize Neutral Criteria for Proxy Effects: Before implementing facially neutral criteria, evaluate and document whether they are proxies for protected characteristics.
• Eliminate Diversity Quotas: Focus solely on nondiscriminatory performance metrics without reference to protected traits.
• Avoid Exclusionary Training Programs: Ensure trainings are open to all qualified participants.
• Review Third-Party Contracts: Include nondiscrimination clauses and monitor compliance.
• Protect Whistleblowers: Implement and communicate policies that prohibit retaliation against individuals who engage in protected activities.

Moving forward, any organization that receives federal funding should carefully review its programs, policies, and partnerships to evaluate whether changes should be made. If your organization receives federal funds, consider consulting legal counsel to assess your current practices and ascertain whether you should or need to make changes in order to comply with federal standards.

Thanks to Surbhi Bhatter, Williams Parker Summer Associate, for her research and drafting support on this article.