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Employers receiving federal funds face renewed scrutiny of DEI and anti-bias programs

8/7/25

By: Sunshine R. Fellows

On July 29, 2025, Attorney General Pam Bondi issued a memorandum to federal agencies accompanied by new guidance addressing how recipients of federal funding must comply with anti-discrimination laws. While the message is framed broadly, it carries pointed implications for employers operating under the umbrella of federal financial support – particularly those with diversity, equity, and inclusion (“DEI”) programs in place.

The core directive is this: Legal compliance must take precedence over intent or branding. Regardless of how a program is described or what goals it aims to achieve, federal law prohibits differential treatment based on race, sex, religion or other protected classifications.

Guidance in focus: what employers need to know

The newly released guidance outlines the government’s expectations for all entities that receive federal funds. Key elements include:

• Substance over optics: Programs that appear neutral on their face may still violate civil rights laws if they result in individuals being treated differently based on protected characteristics.

• Proactive review required: Federal funding recipients are advised to critically assess existing policies, partnerships and practices to ensure they are compliant with anti-discrimination obligations.

• Risk management emphasized: The guidance suggests that compliance is not only a legal imperative but also a practical strategy for avoiding litigation, reputational damage and disruptions to funding.

Why it matters now

This development comes at a time when the legality of DEI initiatives is under increased national scrutiny. The message from the federal government is clear: Well-intentioned policies can still cross the legal line if they result in preferential or adverse treatment based on protected status.

For employers, especially those in education, healthcare, research or industries with federal contracts, this guidance signals a need to reassess:

• Internal programs aimed at promoting diversity in hiring, promotions or training.

• External partnerships with advocacy groups, consultants or vendors focused on DEI.

• Language and framing used in policies, job postings and corporate communications.

Next steps for employers

To align with this guidance and mitigate potential exposure, employers should consider the following action plan:

• Conduct a legal audit of all DEI-related initiatives, particularly those affecting employment decisions.

• Update policies and training materials to ensure compliance with civil rights statutes, such as Title VI, Title VII and Title IX.

• Engage employment counsel to review practices and provide practical recommendations tailored to your organization’s structure and risk profile.

• Educate leaders and stakeholders about the new guidance and the importance of lawful implementation of inclusion efforts.

Conclusion

This federal guidance does not prohibit the pursuit of inclusive and respectful workplaces – it simply requires that such efforts remain grounded in legal compliance. Employers who receive federal funds now have a clear mandate: Review everything. Labeling something “equity” or “diversity” is not a shield if the effect is exclusionary or discriminatory.

Organizations that take proactive steps now will be better positioned to maintain funding, avoid liability and model a legally sound approach to inclusion in today’s evolving regulatory environment.

For more information, please contact Sunshine Fellows at sunshine.fellows@fmglaw.com or your local FMG attorney. 

Information conveyed herein should not be construed as legal advice or represent any specific or binding policy or procedure of any organization. Information provided is for educational purposes only. These materials are written in a general format and not intended to be advice applicable to any specific circumstance. Legal opinions may vary when based on subtle factual distinctions. All rights reserved. No part of this presentation may be reproduced, published or posted without the written permission of Freeman Mathis & Gary, LLP.