DEI Scrutiny Update: DOJ Issues Guidance on Anti-Discrimination Obligations for Federal Funding Recipients 

Health care and different federal funding recipients now face escalating authorized threat of their implementation of variety, fairness and inclusion (“DEI”) packages. The Executive Branch continues to reshape the enforcement of civil rights legal guidelines on this area, starting with Executive Orders as mentioned right here, adopted by directives to the Department of Justice (“DOJ”) and the Equal Employment Opportunity Commission (“EEOC”), as mentioned right here and right here, and thru focused company actions equivalent to the joint letter from the U.S. Departments of Education (“DOE”) and Health & Human Services (“HHS”) to Duke University (“Duke”) relating to race-conscious programming in a federally funded medical pathway program.

Now, the Attorney General has issued a brand new memorandum additional clarifying the present administration’s place relating to what kinds of DEI actions violate federal anti-discrimination legal guidelines (“the July DOJ Memo” or the “Memo”). The Memo additional recommends particular “Best Practices” for recipients of federal funding. 

The July DOJ Memo

On July 29, 2025, U.S. Attorney General Pam Bondi issued the July DOJ Memo, titled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination.” The July DOJ Memo builds on Executive Order 14173 (issued in January 2025) and different DOJ/EEOC steerage from this administration, updating pre-existing interpretations of Title VII within the DEI context. The July DOJ Memo goals to make clear how federal civil rights legal guidelines apply to packages administered by federal funding recipients, as mentioned additional under. While not legally binding, this newest steerage alerts an more and more aggressive enforcement posture from the present administration relating to DEI actions. 

The July DOJ Memo applies broadly to recipients of federal monetary help, together with hospitals, well being methods, universities, analysis establishments, native governments and nonprofit entities. Although the Memo is styled as non-binding steerage, it displays DOJ’s view that many DEI-related initiatives now threat violating Title VI, Title VII, Title IX, Section 1557 of the ACA and the Equal Protection Clause. 

Unlawful Practices

The July DOJ Memo outlines 4 classes of DEI actions it considers presumptively illegal if carried out by recipients of federal funds, together with federal contractors, grantees or subawardees: 

1. Explicit Preferences Based on Protected Traits: Programs that award advantages—equivalent to scholarships, grants, management roles, internships or contracts—primarily based on race, intercourse, faith or different protected traits, could also be deemed illegal even when framed as equity- or inclusion-oriented. 
2. Use of Proxies for Protected Status: Programs utilizing proxies like zip codes, “lived expertise” or socioeconomic standing to attain race- or sex-based outcomes are usually not insulated from problem. If the influence of such categorization mirrors prohibited classifications, this system could also be discovered discriminatory. Additionally, any hiring, admissions, promotion or contracting course of that explicitly or implicitly favors people primarily based on a protected trait could also be flagged as noncompliant with federal regulation. 
3. Segregated Spaces or Participation Tracks: Affinity teams, identity-based lounges, mentorship cohorts or retreats that group or exclude individuals primarily based on race, intercourse or different protected traits could also be seen as illegal segregation. 
4. Stereotyping or Hostile DEI Content: DEI programming or coaching that identifies people primarily based on race, intercourse, faith or comparable traits, or reinforces stereotypes, or forces individuals to affirm ideological positions or “confess” to non-public biases or privileges could also be deemed discriminatory or making a hostile setting, even when meant to advertise inclusion. 

Best Practices: What DOJ Expects from Federally Funded Entities

To mitigate threat and keep away from enforcement, the July DOJ Memo urges recipients to undertake “Best Practices,” together with: 

• Use impartial eligibility standards, equivalent to monetary want or tutorial benefit, when figuring out entry to packages or alternatives. 
• Eliminate group-based quotas or targets and candidate slates, even aspirational ones. 
• Screen DEI content material and coaching for language that might be interpreted as stereotyping or being exclusionary. 
• Add clear nondiscrimination phrases to contracts, subawards and partnership agreements, and monitor compliance. 
• Avoid euphemisms or branding that alerts preferences or quotas, even the place intent is well-meaning. 

Joint Letter from DOE and HHS to Duke University

On July 28, 2025, DOE and HHS issued a joint letter (“Duke Letter”) to Duke’s President and Board of Trustees and the Dean of Duke’s School of Medicine, accusing Duke Health of participating in racial preferences that will violate federal civil rights legal guidelines—particularly Title VI of the Civil Rights Act and Section 1557 of the Affordable Care Act. 

The letter asserts that practices equivalent to race-based recruitment, admissions, scholarships, mentoring and hiring at Duke Health might be illegal and jeopardize its eligibility for federal funding. The Duke Letter signifies DOE and HHS’s collective need to work collaboratively with Duke however calls for fast motion. The Duke Letter requests the formation of a “Merit and Civil Rights Committee” with delegated authority from Duke’s Board of Trustees, which could have six months to fulfill the Departments’ checklist of necessities for sustaining the established order, as follows: 

• Undertake a complete inner evaluation of Duke Health’s insurance policies and practices to determine “unlawful use of race preferences”; 
• Reform all insurance policies and practices that “unlawfully take account of race or ethnicity to bestow advantages or benefits”; and 
• Provide assurances that Duke Health’s new insurance policies can be “carried out faithfully going ahead.” 

Finally, the Duke Letter signifies that if the above steps are usually not taken, or if tried reform is inadequate, enforcement efforts might comply with. 

The Duke Letter is one other indication that the present administration is taking a agency stance with respect to DEI initiatives, and it’s critical about guaranteeing its priorities are carried out. Notably, the Letter requests that Duke kind its committee and fulfill the required motion objects earlier than both company has accomplished (and even began) an investigation into Duke’s alleged wrongdoing underneath the brand new scheme. This alerts that the present administration could also be treating allegations alone as confirmed wrongdoing, which can pose a further layer of issue for federally funded entities. It is unlikely that the Duke Letter can be one-of-a-kind, and federally funded entities are well-advised to stay alert relating to the altering enforcement panorama.  

Practical Takeaways

• Understand your group’s numerous federal funding streams with the intention to adequately put together for potential authorities inquiry underneath the Civil Rights Fraud Initiative, as mentioned right here. 
• Consider conducting an attorney-client privileged inner evaluation on your present DEI practices to make sure they’re defensible underneath federal civil rights legal guidelines. 
• Consider updating the terminology used to explain packages designed to make sure inclusivity with the intention to keep away from implications of impermissible discrimination. 
• Consider revising any public-facing firm statements relating to DEI to make sure that such statements mirror lawful non-discrimination practices. 
• Educate and remind managers, supervisors and staff that those that categorical considerations about potential civil rights violations underneath DEI insurance policies are protected against retaliation in the identical method as any worker expressing considerations about probably anti-discriminatory practices. 
• Assess publicity and compliance posture now, earlier than enforcement actions start, and consider whether or not your counsel is ample to deal with each DEI and FCA points on this period of uncertainty. 
• Continue to verify Hall Render’s web site for updates to litigation and company motion associated to DEI. 

Hall Render will proceed to trace these adjustments and supply updates as the difficulty progresses. 

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