Employers Seeking Diversity Via Proxy Draw Fresh DOJ Scrutiny

The Trump administration has narrowed employers’ options for boosting workforce diversity, cutting off long-used tools for recruiting Black and Hispanic talent if regulators aggressively follow the latest Justice Department guidance on illegal DEI.

The memo gives examples of diversity, equity, and inclusion practices the department sees as violating federal anti-discrimination laws, including Title VII of the 1964 Civil Rights Act. Dated July 29, it provides federal agencies nonbinding guidance on how to evaluate recipients of federal contracts and grants for civil rights law compliance.

Employer policies that recruit job candidates or reserve interview slots based on facially neutral criteria, for example, can be illegal if they’re a proxy for protected traits such as race and gender, according to the memo. Such criteria could include geographic diversity, cultural experiences, and graduation from historically Black colleges and universities.

Agencies such as the Equal Employment Opportunity Commission allowed that kind of recruiting and in some cases required federal contractors to do it in the past, said Cara Yates Crotty, attorney at Constangy Brooks Smith & Prophete LLP.

Employers will now have to wrestle with “the uncertainty around recruitment that this memo creates,” she said. “If the employer only recruits from HBCUs, I think the administration would challenge that.”

The document is the latest in a string of executive orders and policy statements from President Donald Trump’s second term, reinforcing the administration’s priority of rooting out what it considers illegal DEI in American life, spanning employment, education, and law firm operations. Like other policy declarations since January, the DOJ memo lays out positions that reverse Biden’s and previous administrations’ views on affirmative action and anti-bias laws.

Some employment lawyers and legal scholars have suggested employers might be safer from federal scrutiny and still diversify their workforces if they focus on criteria such as socioeconomic class. Republican EEOC Acting Chair Andrea Lucas told a podcast host in 2024—while she was an EEOC commissioner—that employers should consider other kinds of diversity criteria such as programs to boost first-generation professionals.

The use of proxy criteria is a gray area, at best, in light of the DOJ memo, Crotty said. Whether the government can bring a bias case against an employer will depend on the intent and the specific facts behind its use of those criteria, she said.

The administration also has said it’s backing away from cases of disparate impact or unintentional discrimination, which reinforces the idea that efforts to penalize companies over neutral criteria would focus on cases where it’s intentionally used as a proxy for protected traits.

“If your motives are pure, then you’re not breaking the law,” said William E. Trachman, general counsel at Mountain States Legal Foundation, which represents workers challenging company DEI programs as discriminatory. “If you truly want geographic diversity because you think geographic diversity helps your portfolio and helps you sell to different markets, then you have nothing to worry about.”

Corporate responses to the Trump administration’s and conservative activists’ heightened DEI scrutiny have varied widely, with some like Reynolds American Inc. and T-Mobile US Inc. announcing a broad pullback from diversity policies, while others like Walmart Inc. announced changes in policy and language choices but kept many DEI-related concepts in place.

Fact-Specific Cases

The EEOC or a private plaintiff would need to uncover evidence of discriminatory intent if they sue an employer over the use of neutral hiring criteria that they claim is a proxy for race, gender, or another protected trait, said Julie Levinson Werner, attorney at Lowenstein Sandler LLP.

“At the end of the day, every one of these situations is very fact specific, is very case specific,” she said.

The EEOC and DOJ might still have a hard time convincing courts that a practice of broadening the candidate pool violates Title VII, if it doesn’t tilt the final hiring decision toward any particular race or gender.

“Ultimately you have to pick the person without regard to skin color: that’s always been the law,” Werner said.

For claims of Title VII violations, the government would have to prove the employer’s action yielded discrimination with respect to a term or condition of employment, said Samia M. Kirmani, an attorney at Jackson Lewis PC.

In the case of a recruiting strategy, “an employer would be arguing it didn’t make any employment decisions based on protected characteristics,” she said.

There isn’t much case law to directly support or reject the DOJ’s interpretation of Title VII related to proxy criteria and efforts to widen applicant pools, the attorneys said.

The EEOC has taken the position under prior administrations that discriminatory recruitment practices could violate Title VII, but those “cases are few and far between,” Crotty said. They’ve tended to arise in instances where recruiting practices appear aimed at reinforcing a homogeneous status quo.

“You see them more in situations where an employer has a workforce that has no representation of, for example, women in a historically male dominated industry or field,” she said.

Many employers have already made the adjustments they’re going to make under this administration, Werner said. The DOJ memo probably doesn’t change many minds on how much risk tolerance they have for continuing their DEI efforts.

“I don’t know that the law meaningfully changed,” she said. “This is just a very active, aggressive administration, and it’s making employers a little skittish.”