DOJ Issues Memo: Discrimination Risks for Educational and Other Tax-Exempt Institutions
Last week (July 30th), the Department of Justice (DOJ) released long-awaited guidance[1] regarding DEI programs in educational institutions and the application of federal anti-discrimination laws to recipients of federal funds.[2]
On January 21, 2025, President Trump issued Executive Order 14173: Ending Illegal Discrimination and Restoring Merit-Based Opportunities (“EO 14173”), which made good on the President’s campaign promise to target DEI and DEIA mandates, policies, programs, preferences, and activities within the federal government, contractors, and grantees.
As we previously explained, the US Attorney General (AG) set a deadline of May 21, 2025, for the Civil Rights Division and Office of Legal Policy to jointly file a report to the Associate AG regarding illegal DEI and DEIA discrimination and preferences in the private sector, including investigation and enforcement strategies and priorities. That date came and went without that guidance being made public. This AG memo is not that, but something different. They are presented as guidance directly to colleges, universities, and other recipients of federal funds. In addition to those organizations, they provide useful insights for third parties who may transact or partner with educational institutions, including scholarship foundations and other tax-exempt organizations.
These latest recommendations align closely with our analysis following prior guidance, with only a few notable exceptions. In addition to any consequences that already existed under federal law, the memo focuses on equal treatment as prohibiting preference or exclusion based on any characteristic and provides several examples of what DOJ will consider unlawful discrimination. In addition to restating prior conclusions, the memo clarifies a few ambiguities or gaps in prior guidance, including certain proxy terms in lieu of problematic terms, and confirming that third-party arrangements are not free from scrutiny.
Besides proscriptive guidance, the best practices mainly confirm what we and other practitioners have concluded as far as conservative approaches for educational institutions and affiliated tax-exempts. But they are helpful in strengthening these conclusions by adding some assurance that DOJ will apply the relevant Executive Orders and applicable federal law similarly. Organizations whose approaches already align with this guidance can breathe at least a little easier. For organizations who have waited for further guidance, the memo clarifies factors that may assist organizations in evaluating risk, structuring policies and agreements, and measuring and documenting compliance.
While the memo provides only “nonbinding suggestions” in the form of best practices that will not have precedential effect in the event of litigation, the DOJ memo is highly probative of investigation and enforcement priorities and referral criteria, meaning that these best practices should be well understood in structuring or reviewing any public communications, third-party agreements, or internal policies and practices.
Discussion
The guidance purports to provide “non-binding suggestions” or “Best Practices,” which it describes as “not mandatory requirements but rather practical recommendations to minimize the risk of violations.”
If you’re wondering what this means for the merits of a potential claim against an institution, it does not change much, because the memo has no precedential value (i.e., courts are not bound by its guidance). But it does clarify (to some extent) the goals, interpretations, and enforcement priorities or criteria that the DOJ is likely to apply.
Because the guidance is non-binding, it should not inform a judge’s interpretation of the law. However, it is very likely to be probative of investigation and enforcement activity. Institutions wishing to stay “off the radar,” are therefore encouraged to at least understand the guidance to weigh the implications of any existing or prospective plan, agreement, policy, transaction, award, etc.
Preferential Treatment and Unlawful Practices.
The DOJ memo does not affect federal law per se. It neither expands nor limits the statutory restrictions on discrimination based on race, sex, color, national origin, or religion. It reinforces earlier guidance that DEI, Equity, or similar “euphemistic terms” like these will not shield an organization from enforcement of federal anti-discrimination law and a label will not make an otherwise discriminatory act or policy permissible.[3]
The memo explains that preferential treatment is unlawful, which it defines as any opportunities, benefits, or advantages to individuals or groups based on protected characteristics in a way that disadvantages other qualified individuals, even when portrayed as a preference or encouragement. It also explains that using protected characteristics in employment, opportunities, benefits, or other decisions is very broadly prohibited except in very limited circumstances (e.g., where there is some overriding “compelling interest”).
Examples of Unlawful Practices:
- DEI-funds, scholarship awards, internships, mentorships, leaderships initiatives, or other opportunities dedicated or allocated to, or reserved for, a specific racial group.
- Prioritizing candidates from “underrepresented groups” in any hiring, admission, promotion or similar decision when the relevant group is defined by reference to a protected characteristic like race.
- Designating a “safe space”, lounge, or other facility exclusively for a specific racial or ethnic group. Without explicitly addressing a facility reserved for groups “other than __,” such groups would likely be subject to the highest scrutiny.
- Hosting workshops, trainings, or similar events that limit participation to individuals identifying as within a group defined by reference to protected characteristics (e.g., underrepresented minorities).
- Sex-based selection of contracts or programs, even as tiebreaking factor where candidates are equally qualified. Examples include prioritizing women-owned or black-owned businesses, “diverse slate” policies or hiring quotas, or preferring underrepresented applicants in any scholarship, fellowship, or similar program.
Unlawful Proxies.
An important feature of the memo is its guidance regarding proxy phrases – which it describes as facially neutral criteria used instead of protected characteristics that would themselves violate federal law. Examples include “lived experience,” “cultural competence,” and even geographic targeting.[4]
The DOJ states that organizations must (i) “rigorously evaluate and document” whether any facially neutral criteria are proxies for race, sex, or other protected characteristics; and (ii) apply any program uniformly without targeting areas or populations to achieve racial or sex-based outcomes (e.g., “low-income students”).
Third-Party Funding Not Free From Scrutiny.
According to the memo, “recipients of federal funds should ensure federal funds do not support third-party programs that discriminate.” We previously advised that this interpretation of EO 14173 was almost a foregone conclusion, though some commenters and clients were less certain. The guidance now confirms that DOJ may view third-party recipients of federal funds as an extension of the primary recipient or contractor for purposes of enforcing DEI Executive Orders.
In the author’s view, any prospective third-party engagement or partnership should undergo similar analyses and risk assessment/mitigation procedures as a geographically targeted program or policy:
- is this action, decision, or policy designed or intended to accomplish indirectly what the organization could not do directly?
- if not, does the organization know or believe at the time of the action, decision, or policy that it will have a disproportionate impact?
- has the organization taken reasonable steps to avoid the misuse of funds or other indirect activities for discriminatory actions, decisions, or policies?
DOJ recommends “explicit nondiscrimination clauses in grant agreements, contracts, or partnership agreements.” At minimum, these would require third parties to (i) comply with federal law, and (ii) ensure that federal funds will not be used for programs that discriminate based on protected characteristics.
Organizations dealing with third parties should monitor their activities, which may include reviewing program materials, feedback and outcome data, terminating funding or partnerships that are noncompliant.
Protection for ‘Conscientious Objectors.’
Individuals who object or refuse to participate in discriminatory programs, trainings, or policies are protected from adverse actions. The DOJ emphasized that adverse actions against employees, participants, or beneficiaries for opposing DEI practices constitute unlawful retaliation.
Protected activities include raising concerns, filing complaints, or refusing to participate in potentially discriminatory programs. The memo suggests that (i) organizational handbooks, codes, and guidelines should note these protections; and (ii) organizations should provide safe and accessible channels for reporting concerns.
Prescriptive Recommendations.
Organizations should not exclude or reserve spaces, events, facilities, training, support, or other resources or benefits based on race or other protected characteristics except where biological differences or constitutionally valid interests outweigh equal treatment (e.g., privacy in bathrooms). This has long been a widely accepted standard despite a few creative arguments to the contrary.
Base selection decisions on merit – skill, fitness, demonstrated successes, experience, or other qualifications instead of criteria that refer to, depend on, or strongly indicate racial characteristics without a legitimate reason that is separate from that characteristic. Similarly avoid demographic criteria unless such criteria are rationally related to the legitimate educational purpose or exempt purpose of the organization.
Though not addressed in the memo, organizations should generally avoid delegating undefined or overly expansive discretion to committees, officers, or employees in determining how or to/from/for whom certain funds, opportunities, or benefits should be reserved, awarded, or withheld. Depending on the relevant statutory standard, a policy of willful ignorance or deference that furthers or enables prohibited conduct may amount to an act or omission that exposes the organization or its control persons to liability.
As usual, organizations should document their clear and legitimate rationales for selection, hiring, or award decisions. These rationales should be applied consistently and in good faith and should not indicate a pattern of discrimination.
If you have questions about this article, the Executive Orders, or the AG DEI memo, contact the author Nick Stock (NStock@FosterSwift.com).
[1] See Memo from Attorney General Pam Bondi, dated July 30, 2025, available here: https://www.justice.gov/ag/media/1409486/dl?inline
[2] We have covered the DEI Executive Orders extensively. Most recently, here: Nick Stock - DEIA Executive Orders & Consequences for Educational Institutions
[3] Based on the tone of current guidance and express statements made in interviews and in prior government enforcement directives, it would be reasonable to infer that such terms are clearly disfavored by the current USAG and would in fact subject an organization to heightened enforcement scrutiny.
[4] The reader may wonder how or why geographically limited criteria alone would constitute discriminatory criteria based on a protected characteristic. Without clearer guidance here, geographical targeting seems out of place with the other examples provided which are more clearly “proxies” instead of indirect mechanisms for effecting illegal ends through legal means. The memo goes on to imply by example that what is meant is geographical restrictions designed to disproportionately target or exclude a specific class of individuals (i.e., doing indirectly what is illegal directly).
