Attorney General Pam Bondi issued a memorandum on 29 July 2025 titled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination” (Memorandum)¹ that provides new, detailed guidance on a key question that had been left unanswered in the series of directives issued by the Trump administration targeting diversity, equity, and inclusion (DEI) initiatives in the private sector: what does the administration consider to be “illegal DEI”? 

The Memorandum aims to clarify application of federal antidiscrimination laws to hiring and employment programs and provides a number of examples which in the Trump Administration’s assessment cross the line and could expose companies to liability. The Memorandum also provides suggested best practices for companies to consider as “practical recommendations to minimize the risk of violations” of federal antidiscrimination laws. 

The guidance will have implications for all companies subject to US antidiscrimination laws but is specifically directed to provide guidance for recipients of federal funding (e.g., educational institutions, government contractors, grant recipients), underscoring the heightened risks such entities face on this topic. Since President Trump’s inauguration, the Department of Justice (DOJ) has repeatedly raised the prospect of False Claims Act (FCA) liability for recipients of federal funding that maintain illegal DEI practices, according to the administration. The Memorandum, while providing welcome insight regarding the types of practices that DOJ will likely view as unlawful, appears to be a further step toward heightened investigations, enforcement, and litigation in this area.²

Overview of “Illegal DEI”

The Memorandum provides a “non-exhaustive list” of unlawful practices that could result in revocation of grant funding. The practices listed include:

• Granting preferential treatment based on protected characteristics while disadvantaging other qualified persons. Among the examples given are race-based scholarships, internship, and mentorship/leadership programs that exclude qualified applicants of other races; preferential hiring and promotion practices (including use of “diverse slates” and prioritizing candidates from “underrepresented groups”); limiting access to facilities or resources based on race or ethnicity (e.g., a “safe space” or lounge); and prioritizing contract awards for businesses owned by women or minorities. 
• Using unlawful proxies for protected characteristics that appear neutral but are intended to act as substitutes for protected characteristics. These could include requirements for job applicants to demonstrate “cultural competence” or “lived experience;” targeting specific geographies or institutions because of their racial or ethnic composition; and requiring narratives on diversity or overcoming obstacles.
• Segregation based on protected characteristics, such as race-based trainings. The Memorandum emphasizes, however, that failing to maintain sex-separated athletic competitions and intimate spaces can also violate federal law, and that entities should “affirm sex-based boundaries rooted in biological differences.”
• Training programs that “promote discrimination or hostile environments,” such as through “severe or pervasive” stereotyping, singling out, or demeaning based on protected characteristics. The example given in the Memorandum is DEI training that stereotypes “toxic masculinity” or includes the statement that “all white people are inherently privileged.”

DOJ’s Identified “Best Practices”

The Memorandum also urges entities receiving federal funding to review all programs and policies to ensure compliance and provides a series of “non-binding suggestions” labeled as “Best Practices” to minimize the risk of violations of federal antidiscrimination laws. They include: 

1. Ensure inclusive access to workplace programs, activities, and resources, while avoiding organizing groups or sessions by protected traits. This underscores that, to the extent an organization maintains employee resource groups, the groups be open to everyone. 
2. Make employment decisions based on specific, measurable skills and qualifications directly related to job performance or program participation, while avoiding criteria that are used to prioritize individuals based on protected characteristics.
3. Discontinue any program or policy designed to achieve discriminatory outcomes, even if through “facially neutral means,” in favor of “universally applicable criteria.”
4. Document clear, legitimate rationales for any criteria that might correlate with protected characteristics and ensure they are consistently applied and “demonstrably related to legitimate, nondiscriminatory institutional objectives.”
5. “Rigorously evaluate and document” whether facially neutral criteria may be proxies for protected characteristics. 
6. Eliminate diversity quotas, including policies requiring diverse slate hiring. 
7. Ensure trainings do not exclude (or single out) any qualified participants based on protected characteristics, and avoid segregating participants into groups based on protected characteristics. 
8. Include nondiscrimination clauses in contracts with third parties, monitor compliance of third parties that receive federal funds, and terminate funding for noncompliant programs.
9. Establish clear procedures prohibiting retaliation against individuals who raise concerns or file complaints regarding potential illegal programs.

Implications for Recipients of Federal Funding

There are several potential consequences for federal funds recipients that maintain an illegal DEI program or policy. The Memorandum cites four sources of federal antidiscrimination prohibitions that could be implicated, including Titles VI and VII of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, and the Equal Protection Clause of the U.S. Constitution. 

In addition, although noticeably absent from the Memorandum, the FCA hangs over all of these matters, particularly given recent statements from the Trump administration. 

The FCA prohibits any person from knowingly submitting or causing to be submitted a false or fraudulent claim for payment to the federal government. For FCA liability to attach, the false claim must be material to the government’s decision to provide the funding. The consequences of FCA liability are severe—penalties on a per-claim basis and up to treble damages. Beyond the financial impact, FCA liability may lead to potential suspension and debarment of a government contractor. Increasing the risk of an already broad statute, the FCA also allows private citizens to bring lawsuits on behalf of the government (“qui tam” or relator lawsuits) and keep a meaningful percentage of any recovery, thus incentivizing further policing of potential FCA issues. 

The Trump administration has issued three directives that articulate how it may use the FCA as a tool to combat illegal DEI initiatives utilized by recipients of federal funds. 

First, Executive Order 14173, issued on 21 January 2025,³ requires federal contractors to certify that they do not operate programs promoting unlawful DEI and to acknowledge that compliance with all applicable federal antidiscrimination laws is “material” to government payment decisions for purposes of the FCA, an often heavily litigated issue.⁴ The government and qui tam relators can be expected to assert that every claim for payment is in violation of the FCA where the recipient utilizes illegal DEI.

Next, to advance Executive Order 14173, Attorney General Bondi issued a memorandum in February 2025⁵ that directs the Civil Rights Division to, among other things, develop a plan to “deter the use” of DEI programs, “including proposals for criminal investigations and for up to nine potential civil investigations of entities” and “additional potential litigation activities.” 

Finally, on 19 May 2025, Deputy Attorney General Todd Blanche issued a memorandum⁶ to create the Civil Rights Fraud Initiative, focused on utilizing the FCA to “aggressively” investigate and pursue any federal funds recipient or contractor that knowingly engages in illegal DEI, including by encouraging the filing of qui tam actions and the reporting of discrimination to DOJ.

Until this point, the government declined to specifically define “illegal DEI.” Now, with new guidance from Attorney General Bondi as set forth in the Memorandum, DOJ and qui tam relators have specific examples of what the administration considers to be unlawful or illegal DEI practices, which can be used to measure conduct of federal fund recipients. At the same time, the Memorandum supplies a roadmap of DOJ’s views on “best practices” for “avoiding legal pitfalls.” 

Key Takeaways

Entities subject to federal antidiscrimination laws—and educational institutions, government contractors, and grant recipients in particular—should carefully consider the guidance contained in the Memorandum and closely review the recommendations when evaluating their own programs, policies, and third-party contracts.

The guidance in the Memorandum will likely represent US procurement and award policy under this administration, impacting decisions on awarding and terminating contracts, which may not be subject to judicial review. 

As to the FCA, although courts will ultimately decide what is illegal under federal discrimination laws and regulations, the government’s interpretations in the Memorandum will, at a minimum, drive decisions on the types of programs to investigate and influence the filing of qui tam actions. The mere existence of such matters can prove costly for any entity (financially, operationally, and reputationally). Because the FCA requires scienter (i.e., a knowing intent, reckless disregard, or deliberate indifference), entities are also advised to internally document conclusions that programs are legal, including if such conclusions may not align with DOJ’s views. 

Entities affected by this guidance should carefully evaluate their programs and consult counsel as appropriate, including in the event of any government inquiry or FCA investigation. 

Footnotes