Ensuring Compliance with Federal Antidiscrimination Laws: What Government Grantees and Contractors Need to Know

July 31, 2025

In the world of public sector administration, grant programs and the policies that govern them can be complex, resource-intensive, and often difficult to manage. What if there was a way to ensure effective oversight of these programs without having to take on the full burden of direct administration? There is. The answer lies in leveraging the power of fiscal agents and fiduciaries. 

As the landscape of federal funding evolves, the U.S. Department of Justice (DOJ) has issued a clarifying memorandum to ensure that antidiscrimination laws remain firmly enforced, even in the context of programs focused on Diversity, Equity, and Inclusion (DEI). The memorandum makes it clear: federal laws against discrimination must be upheld across all government-funded programs, and efforts to promote DEI cannot be used as an excuse for unlawful biases. Here’s what government entities, grantees, and contractors need to know to stay compliant and mitigate risks of waste, fraud, and abuse. 

Key Takeaways: 

• Programs labeled as DEI-focused cannot justify unlawful discrimination. The DOJ will no longer overlook practices under the guise of well-intentioned diversity efforts. Discriminating based on race, sex, or other protected traits remains illegal, regardless of the program's intent. 

• Federal law prohibits preferences based on race, sex, or any protected characteristic. Grantees and contractors must avoid practices such as quotas, set-asides, or other measures that unfairly favor certain groups at the expense of others. 

• Privacy-based separation (e.g., single-sex restrooms or sports teams) is permitted when relevant for safety, fairness, or privacy. However, gender-inclusive policies cannot infringe on these rights. 

• Avoid criteria that disguise discrimination by correlating indirectly with protected traits. Criteria such as "cultural fit" or "first-generation status" must not be used as proxies for race, sex, or other protected categories. 

• Federal funding recipients must ensure that third-party contractors and sub-grantees comply with the same nondiscrimination rules. Agencies should monitor their partners’ programs to ensure they align with federal anti-discrimination laws. 

• Individuals who report unlawful discrimination are protected from retaliation. Grantees and contractors must ensure that employees or program participants who speak out against discriminatory practices are not penalized. 

Best Practices for Compliance: 

• Programs, and their related grant and contract materials, should focus on the why and how, not just the who. 

• Make all programs, training, and opportunities open to all qualified individuals, regardless of race, sex, or other protected traits. 

• Use objective qualifications (e.g., academic performance, relevant experience) rather than demographics to select program participants or beneficiaries. Focus on merit-based criteria to ensure fairness. 

• If demographic-related criteria are necessary, document the rationale clearly. Ensure that decisions are tied to legitimate program goals and not based on race, sex, or other prohibited characteristics. 

• Discontinue any diversity quotas or mandatory race/sex representation targets. Decisions should be based on qualifications, not demographic makeup. 

• Ensure DEI training or similar initiatives are voluntary and inclusive, and avoid segregating participants by race, sex, or any other protected trait. Policies should not force ideological participation but instead offer educational, respectful dialogue. 

• Protect whistleblowers and provide confidential, safe channels for reporting discriminatory practices. Encouraging transparency and addressing complaints swiftly can prevent legal issues. 

Conclusion: 

The DOJ’s latest memorandum emphasizes the critical importance of upholding anti-discrimination principles in federal funding programs. As we continue to promote diversity and inclusion across public sector initiatives, it’s essential to ensure that these efforts don’t inadvertently cross legal lines. By implementing these compliance measures and best practices, government entities, grantees, and contractors can foster more effective, inclusive, and legally sound programs that benefit all participants fairly and equally. 

Let’s focus on equal opportunity for everyone, ensuring that all programs, regardless of their objectives, adhere to the highest standards of fairness and accountability. 

Managing grants efficiently, without compromising compliance and integrity, can be a challenging task. If your organization is navigating the complexities of grant management, we can help you enhance oversight, streamline processes, ensure outcomes and reduce the risks of waste, fraud, and abuse. Reach out today to learn how our expertise in grants management can ensure your programs meet their goals, stay compliant, and make the best use of taxpayer dollars. 

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