DOJ guidance on unlawful discrimination: Implications for DEI practices in the private sector

Unlawful discriminatory policies and practices

The guidance offers a non-exhaustive list of unlawful practices that could result in the revocation of federal grant funding. The list includes (i) preferential treatment based on protected characteristics; (ii) prohibited use of proxies for protected characteristics; (iii) segregation based on protected characteristics; and (iv) training programs that promote discrimination or a hostile environment. The most salient issues from this list are as follows:

DEI programs remain a bull’s-eye target 

The guidance reiterates that diversity, equity, and inclusion (DEI) programs, “no matter the program’s labels, objectives, or intentions,” will continue to be scrutinized. According to the DOJ, “[t]he use of terms such as ‘DEI,’ ‘Equity,’ or other euphemistic terms does not excuse unlawful discrimination or absolve parties from scrutiny regarding potential violations” of federal anti-discrimination laws.

Guidance on sex discrimination conflicts with existing case law and state law

The DOJ also asserts that permitting males, including those who self-identify as “women,” to access single-sex spaces designed for females (e.g., sex-segregated restrooms) risks creating a hostile environment under Title VII. However, this guidance conflicts with existing law. For example, in Bostock, the US Supreme Court held that discriminating against someone because she is homosexual or transgender violates Title VII’s prohibition on discrimination on the basis of sex. (Bostock v. Clayton Cnty., Georgia, 590 U.S. 644 (2020).) Care must be taken to also comply with state and local anti-discrimination laws (e.g., New York State Human Rights Law, Illinois Human Rights Act, California Fair Employment and Housing Act), which typically offer broader protections than Title VII and explicitly outlaw discrimination on the basis of sexual orientation and gender identity (including transgender status).

Although the guidance urges organizations to “affirm sex-based boundaries rooted in biological differences,” employers must also consider Bostock and state law on the issue to help manage their legal risks.

Neutral criteria cannot serve as a proxy for unlawful discrimination

The DOJ further warns that seemingly neutral criteria, such as “lived experience” and “cultural competence,” may function as “potentially unlawful proxies” for a protected characteristic, and therefore should be examined carefully to ensure their usage is in compliance with federal law. For example, if the goal of asking candidates to describe “obstacles they have overcome” in their life is to attract more candidates of a particular racial or ethnic group, such criteria is unlawful even if cloaked in neutral terms.

Training programs may create a hostile work environment

While many jurisdictions require employers to provide annual anti-harassment training, the guidance now targets “unlawful DEI training,” explaining that trainings that penalize individuals based on their protected characteristic or include stereotypes may constitute unlawful discrimination. For example, statements like “all white people are inherently privileged” or discussions of “toxic masculinity” may create a hostile work environment, according to the DOJ.

Renewed focus on religious protections

The guidance also highlights that religious discrimination is evaluated under analogous standards as race and gender discrimination. To that end, recent case law has held that employers must satisfy a heightened standard for denying religious accommodations. (See Groff v. DeJoy, 600 U.S. 447, 468 (2023) (raising the bar for employers in religious accommodation cases for showing undue hardship from “more than a de minimis cost” to requiring the employer to show that the “burden is substantial in the overall context of an employer’s business”).)

Given these developments, employers can anticipate a rise in employees relying on their religion to object to practices that are meant to protect the rights of LGBTQ+ employees. While Bostock previewed this tension between accommodating religious observers and complying with anti-discrimination laws, the court declined to offer any remedy. (Bostock, 590 U.S. at 682 (“But how these doctrines protecting religious liberty interact with Title VII are questions for future cases too.”).)

Best practices to avoid “legal pitfalls”

The guidance presents nine “best practices,” which it describes as “non-binding” “to help entities . . . avoid legal pitfalls.” However, given the backdrop of Loper Bright, in which the US Supreme Court expressly overruled the doctrine of deferring to an agency’s interpretation of allegedly ambiguous statutory language first articulated in Chevron, it is uncertain whether the courts will defer to this guidance. (Loper Bright Enters. v. Raimondo, 603 U.S. 369, 376 (2024).)  The legal uncertainty of this guidance notwithstanding, some of the proposed best practices can help employers manage their legal risk in this area. As such, employers should undertake to:

• Eliminate policies that categorize applicants or employees by protected characteristics (e.g., use of diverse hiring slates, requiring candidates to be “culturally competent,” mentorship programs focused on women or employees from underrepresented groups).
• Scrutinize facially neutral criteria (e.g., zip code, first-generation status, socioeconomic background) to ensure they are not serving as proxies for race or other protected characteristics.
• Review and revise training materials to make explicit that participation does NOT require the employee to personally agree with anything stated during the program.

Conclusion

While the guidance does not change existing law, it reinforces the Trump administration’s view that many DEI employment practices may be unlawful. The guidance may further complicate employers’ ability to comply with the panoply of federal, state, and local anti-discrimination laws. Private employers can anticipate continued scrutiny of their practices and, for those who receive federal funds, perhaps even more aggressive tactics (e.g., rescission of funds). As such, employers should take this opportunity to assess their policies and practices to reduce legal risk and ensure compliance with existing law.

If you have any questions concerning this alert, please contact your McDermott Will & Schulte lawyer or one of the authors.