EQUITY+INCLUSION+CULTURE: Understanding the DOJ's New Memorandum on "Illegal DEI"

On the September 4th AICP Town Hall, Jaclyn K. Ruocco, Partner at Ellenoff Grossman & Schole (EGS) – AICP’s General Counsel - provided an update on a Department of Justice (DOJ) memo on “illegal DEI.” (Click here to view the memo.) Below, please see an overview from Jacki regarding the memo as well as addressing questions regarding certifications such as Minority Business Concern (MBE) or Women's Business Enterprise (WBE).

If you have questions about this notice, or any other equity and inclusion issues, please email Sheila R. Brown at sheilab@aicp.com. 

Understanding the DOJ’s New Memorandum on “Illegal DEI”

As we reported on a recent AICP town hall, the United States Attorney General published a memorandum entitled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination” (the “DOJ Memorandum”). The DOJ Memorandum, a copy of which can be viewed by clicking here, is not law, and instead it provides employers with guidance regarding what the current administration considers “illegal DEI,” including suggestions on how federal anti-discrimination laws apply to DEI programs, regardless of whether they are labeled “DEI” or called something else. The DOJ Memorandum applies to federal agencies and recipients of federal funding, including private companies that receive federal funding. 

The following are examples and explanations of “illegal DEI” practices according to the the DOJ Memorandum:

1.    Granting Preferential Treatment Based on Protected Characteristics

This includes providing opportunities, benefits, or advantages based on protected characteristics in a way that disadvantages other qualified individuals. Examples include race-based scholarships or programs; preferential hiring or promotion for “underrepresented groups”; or limiting access to facilities or resources based on race or ethnicity (e.g., designating a location as a “safe space” for a specific protected group).

2.    Prohibited Use of Proxies for Protected Characteristics

The DOJ describes this as using neutral criteria that function as substitutes for considering race, sex, or other protected characteristics. Examples provided include: “Cultural Competence” requirements (such as requiring “lived experience” as a job qualification), geographic or institutional targeting (focusing on geographic areas based on their racial or ethnic makeup), requiring applicants to describe “obstacles they have overcome” or to submit a diversity statement that advantages those with experiences tied to protected characteristics.

3.    Segregation Based on Protected Characteristics

This involves organizing resources or programs in a way that separates individuals on the basis of protected characteristics. Provided examples include: race-based training sessions, segregation in facilities or resources, and implicit segregation through program eligibility (requiring participants in a DEI-focused workshop to meet certain identity-based criteria, effectively excluding others). The guidance specifically excludes maintaining sex-separated athletic competitions and intimate spaces (e.g., bathrooms, locker rooms) from this category of unlawful practices.

4.    Unlawful Use of Protected Characteristics

This includes race-based “diverse slate” policies in hiring (e.g., the NFL “Rooney Rule” - requiring a minimum number of candidates from particular groups), sex-based selection for contracts (e.g., prioritizing awarding contracts to women-owned businesses), race-based or sex-based program participation (even if it is framed as addressing underrepresentation).

5.    Training Programs that Promote Discrimination or Hostile Environments

Training that stereotypes, excludes, or disadvantages individuals based on protected characteristics, or that creates a hostile environment. Examples include statements such as “all white people are inherently privileged” or labeling certain traits as “toxic masculinity.”

The DOJ has provided the following list of best practices:

  • Ensure inclusive access to all workplace programs, activities and resources
  • Focus on skills and qualifications related to job performance or program participation
  • Prohibit demographic-driven criteria
  • Document legitimate rationales for employment decisions
  • Scrutinize neutral criteria for proxy effects
  • Eliminate diversity quotas
  • Avoid exclusionary training programs
  • Include nondiscrimination clauses in contracts to third parties and monitor compliance
  • Establish clear anti-retaliation procedures and create safe reporting mechanisms (and include them in employee handbooks, student codes of conduct, and program guidelines).

As expected, scrutiny of DEI programs continues and the administration’s focus on “illegal DEI” remains a priority. On the town hall, we received questions of whether and how the DOJ Memorandum impacts programs like the WBENC certification program, New York’s M/WBE certification program, and other state or local business incentives for companies that qualify for such incentives. Right now, these programs are still legal to the extent they are outside the scope of the DOJ Memorandum (in other words, they do not receive federal funding). If these programs receive federal funding, they are or will be under heightened scrutiny from the federal government, which may alter how the program works. Presently, we have no information that this has occurred for any local or state program. We will keep you apprised if this changes. In the meantime, companies should audit their policies and practices with the assistance of legal counsel to identify and mitigate potential risks.

This article is published solely for the informational interest AICP members and should in no way be relied upon or construed as legal advice.