August 1, 2025

About 30 minutes ago I sent you information from HHS re: federal funding and what they refer to as “illegal DEI” practices.  Directly below please find useful analysis from our attorneys at Feldesman, followed by a related item updating HHS DEI Certification requirements: 

DOJ Provides Guidance to Federal Funding Recipients on Unlawful Discrimination

In an effort to eliminate the ambiguity over what constitutes “illegal DEI” or “unlawful discrimination,” the U.S. Department of Justice (DOJ) issued a memorandum earlier this week highlighting specific activities recipients of federal funding should avoid—as well as other activities that would constitute “best practices” for compliance.

The Administration’s focus on Diversity, Equity and Inclusion (DEI) initiatives and programs is well known, but to date, the Executive Orders and other issuances have been short on detail.  The more specific guidance issued this week by Attorney General Bondi, in the memorandum, “clarifies the application of federal antidiscrimination laws to programs or initiatives that may involve discriminatory practices, including those labeled as Diversity, Equity and Inclusion (DEI) programs.”  The memorandum cautions that entities receiving federal funds must ensure that their programs and activities comply with federal law and do not discriminate—“no matter the program’s labels, objectives or intentions.”  The memorandum also identifies “best practices” as suggestions to help with compliance.

At the high level, the memorandum asserts that organizations should, among other things, eliminate diversity quotas, end preferential hiring or promotion practices, prohibit “unlawful proxies” for DEI, such as cultural competence requirements or geographic targeting, and cease all trainings that “promote discrimination” based on protected characteristics.  As for best practices, the memorandum recommends focusing on skills and qualifications of applicants instead of other criteria, documenting legitimate rationales if using criteria in hiring or promotions, avoiding exclusionary training programs and including non-discrimination clauses in contracts to third parties.

Trump Administration’s Focus on DEI

The Administration’s focus on DEI activities and potential violations of antidiscrimination laws began with two Executive Orders issued at the start of President Trump’s second term, which called on federal agencies (i) to “terminate, to the maximum extent allowed by law, . . . all . . . ‘equity-related’ grants or contracts” and (ii) to include a term in grant and contract awards requiring grantees and contractors to certify that any DEI activities within their organizations comply with federal civil rights laws; and acknowledge that the certification is material to grant and contract payments for purposes of potential liability under the Civil False Claims Act, 31 U.S.C. § 3729 et seq.

In subsequent months, federal agencies commenced grant terminations and implemented updates to standard terms and conditions in grant awards in furtherance of these EOs, generally without any clarifying guidance on what would constitute impermissible conduct.  Both the HHS Grants Policy Statement (GPS) issued in April 2025 and an NIH notice issued the same month required grantees to attest to compliance with civil rights terms and conditions (including certain DEI provisions) to maintain federal funding. Although HHS dropped some of the specific DEI language in an updated version of the GPS, the July 2025 version still provided that “[b]y applying for or accepting federal funds from HHS, recipients certify compliance with all federal antidiscrimination laws… and that complying with those laws is a material condition of receiving federal funding streams.” Additionally, in May, the DOJ launched a new “Civil Rights Fraud Initiative,” aimed at pursuing DEI-related violations under the False Claims Act.

Specific Guidance from the DOJ Memorandum

The DOJ memorandum is organized by broad categories of conduct and provides examples to illustrate the types of practices that could trigger scrutiny.

• Preferential treatment based on protected characteristics: This section warns against race or sex-based scholarships, internships, hiring preferences, or promotional policies, even if they are intended to address historic inequalities. For example, scholarships offered exclusively to minority students or hiring policies prioritizing candidates from underrepresented racial groups would likely violate federal civil rights law. The memorandum also flags the use of quotas or demographic benchmarks, such as requiring a certain percentage of minority candidates in interview pools.
• Facially neutral criteria serving as a proxy for protected traits: According to the memorandum, certain policies or practices, while not explicitly race or sex based, are selected or applied in ways that disproportionately favor or disadvantage individuals based on specific characteristics. For example, requiring applicants to submit a “diversity statement” or demonstrate “lived experience” can cross the line into prohibited activities if those criteria are used to evaluate a person’s racial or ethnic identity rather than job-related qualifications. Similarly, recruiting from certain geographic regions or institutions primarily because of their racial composition—rather than for legitimate programmatic reasons—could constitute unlawful discrimination.
• Segregation based on protected traits: By focusing on race-based training sessions, lounges, or affinity groups that exclude individuals of other races or identities, the DOJ guidance provides that even if these initiatives are intended to create safe spaces, separating individuals or restricting access based on race and sex can violate federal law. The memorandum emphasizes that federally-funded entities may also violate the law by failing to maintain sex-based boundaries in bathrooms, dormitories and as part of athletic competitions.
• Training programs that stereotype or disadvantage individuals based on protected characteristics: The memorandum cautions that trainings that label entire groups as inherently privileged, biased, or oppressive can create a hostile work or education environment and expose institutions to liability. Similarly, requiring participants to affirm ideological beliefs or confess biases as a condition of participation crosses the line into unlawful discrimination.
• Recommended best practices: The memorandum concludes by highlighting certain suggestions to help federally funded organizations avoid legal risk, while acknowledging that these suggestions are not legally binding. These guideposts include focusing selection decisions on specific skills and qualifications; ensuring all programs, trainings and resources are open to all qualified individuals regardless of identity; and eliminating demographic quotas or outcome-driven targets. The DOJ also advises documenting the rationale for any selection criteria used, screening third parties for compliance and implementing strong anti-retaliation and reporting procedures.

The DOJ’s memorandum offers recipients of federal funding some concrete examples as they undertake programmatic reviews of their DEI-related policies and procedures. Entities that receive federal financial assistance “or that are otherwise subject to federal antidiscrimination laws, educational institutions, state and local governments and public and private employers” should review the guidance in detail to mitigate legal risk.

While the clarifications may be reassuring for some programs, the memorandum still leaves open questions on how implementation and enforcement will proceed. Feldesman attorneys will continue to follow the DOJ’s guidance and enforcement related to DEI activities and issue additional information as available. Please contact Mindy B. Pava or Ted Waters for questions.

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HHS Grants Policy Statement Drops Recently Added DEI Certification Requirement

By Phillip A. Escoriaza|August 1, 2025

In recent months, the Administration has been adding a new condition to Federal awards that ties assurances that grantees comply with long-standing Federal antidiscrimination laws to a requirement that grantees refrain from “Diversity, Equity and Inclusion” activities.  In a recent example, on April 16, 2025, the U.S. Department of Health and Human Services (“HHS”) amended its Grants Policy Statement (“HHS GPS”), which sets forth terms and conditions for federal awards, to provide a new grant term (in turn, recently eliminated) as follows:

“(2) Grant award certification. (a) By accepting the grant award, recipients are certifying that:

“(i) They do not, and will not during the term of this financial assistance award, operate any programs that advance or promote DEI [“Diversity, Equity and Inclusion”], DEIA [“Diversity, Equity, Inclusion, and Accessibility”], or discriminatory equity ideology in violation of Federal anti-discrimination laws; and

“(ii) They do not engage in, and will not during the term of this award engage in, a discriminatory prohibited boycott.

“(3) HHS reserves the right to terminate financial assistance awards and claw back all funds if the recipients, during the term of this award, operate any program in violation of Federal anti-discriminatory laws or engages in prohibited boycott.” HHS GPS (April 2025) at 18-19.

Then, with no explanation, on July 24, 2025, HHS turned around and dropped the above DEIA language in yet another Grants Policy Statement update (the second update in 4 months), providing instead:

“By applying for or accepting federal funds from HHS, recipients certify compliance with all federal antidiscrimination laws and these requirements and that complying with those laws is a material condition of receiving federal funding streams. Recipients are responsible for ensuring subrecipients, contractors, and partners also comply.”  HHS GPS (July 24, 2025) at 19.

The comparatively “watered-down” antidiscrimination language in the just-released July 2025 GPS does not necessarily mean HHS will no longer suspend or terminate grant funding on DEI grounds. DEI-language deletion notwithstanding, the underlying antidiscrimination laws the Administration cites to anchor its “DEI” grant restrictions or award terminations remain embedded in grant terms and conditions, either expressly stated in the notice of award and/or through incorporation of the HHS “Administrative and National Policy Requirements.”

While the relatively more aggressive “DEIA” language in the April 16, 2025, GPS is gone (for now), the softer approach in the July 2025 GPS does not prove the Administration has abandoned “civil rights compliance” and enforcement to pursue “anti-DEI” aims. In fact, DEI enforcement will not abate per the Attorney General’s memorandum to all federal agencies on “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination,” issued on July 29, 2025, which cautions grantees that “unlawful DEI practices” carry “legal, financial, and reputational risk.” See our Client Alert.

In this vein, there may be a range of programs and policies that present varied levels of risk to federal grantees. For example, a policy requiring employees to disclose gender identity or pronouns runs a higher risk of being deemed contrary to federal antidiscrimination laws as the Administration interprets them. However, the fact that some employees may choose independently to disclose their gender identity or include pronouns in their email signatures appears relatively low risk, so long as the grantee does not require employees to disclose such information. A determination of which policies present greater risk and which ones relatively minor risk should be based on the grantee’s best judgment in light of available guidance, documented accordingly. For illustrative purposes, the above-cited Attorney General’s guidance describes examples of “unlawful discrimination” and best practices as “non-binding suggestions” to grantees.