Overview

• The July 29 memorandum lists five unlawful conduct categories for federal fund recipients, including preferential treatment, proxies for protected traits, segregation, protected-characteristic-based selection and discriminatory trainings.
• Although nonbinding, the guidance signals new enforcement priorities by threatening revocation of federal funds and exposure under the False Claims Act for false compliance certifications.
• The DOJ explicitly flags facially neutral criteria—such as cultural competence requirements, geographic targeting and diversity statements—as potential unlawful proxies for protected characteristics.
• Federal grantees and private employers have launched broad audits of DEI programs and are updating contracts and internal policies to reflect the memo’s nonbinding best practices.
• Recommended steps include documenting race-neutral rationales, embedding nondiscrimination clauses in third-party agreements and establishing clear anti-retaliation procedures to mitigate compliance risks.