Our August 2025 Employment Law Update highlights three major developments that could reshape employer liability and compliance obligations. From the DOJ’s crackdown on certain DEI practices, to the ALI’s controversial new sexual assault liability rule, to the Sixth Circuit’s break from EEOC harassment guidance, these shifts signal important changes every employer should be watching.
DOJ Issues Strict Guidance Targeting DEI Practices, Raising Compliance Risks for Employers
The U.S. Department of Justice (DOJ) has issued its most detailed guidance yet on diversity, equity and inclusion (DEI) programs, outlining practices it considers unlawful and signaling heightened scrutiny for employers and institutions that receive federal funding. Although the guidance is limited to these organizations, its reach could extend to the private sector through future EEOC enforcement. Released in a recent memo from Attorney General Pam Bondi, the guidance identifies potentially discriminatory practices and offers “nonbinding suggestions” for compliance.
A central focus of the memo is “proxy” discrimination – the use of seemingly neutral criteria, such as cultural competence or geographic targeting, that in practice serve as stand-ins for protected traits like race or sex. The DOJ cautioned that such methods, along with prioritizing candidates from underrepresented groups, could amount to unlawful bias.
The guidance also flagged “diverse slate” requirements, where employers commit to including candidates from specific backgrounds in hiring pools. The DOJ said these practices create unequal treatment and violate federal law, putting employers on notice that such initiatives may invite enforcement actions.
Other key areas include DEI-related training sessions, which the DOJ warned against if they stereotype or segregate employees, and policies governing “intimate spaces” or athletic competitions, where the agency emphasized protections for sex-based privacy and opportunities. The DOJ repeatedly cited the Supreme Court’s 2023 Students for Fair Admissions decision, reiterating the Trump Administration’s application of that case into the world employment law.
Employers may want to reassess their DEI policies, particularly those involving candidate selection and training, given the DOJ’s now-stricter interpretation of anti-discrimination laws.
ALI’s New Sexual Assault Liability Rule Could Greatly Expand Employer Risk
The American Law Institute (ALI) has approved a new and controversial provision in the Restatement of the Law Third, Torts that could dramatically expand employer liability for sexual assaults committed by employees. Known as the “Special Rule on Vicarious Liability for Sexual Assault,” the provision allows employers to be held strictly liable when four conditions are met: the employee’s role creates a foreseeable risk of assault; the victim is “particularly vulnerable”; the employer grants the employee power or authority over that individual; and the assault occurs during assigned work or within the employer’s control.
This rule marks a sharp departure from the traditional doctrine, which has long treated sexual assault as categorically outside the scope of employment. Historically, employers have only been vicariously liable when misconduct somehow advanced their business interests – such as a company driver speeding to complete a job. By contrast, the ALI’s new approach attaches liability based on power dynamics and job conditions, not employer negligence or intent.
Industries such as healthcare, education, hospitality, and entertainment could face significant new exposure, given the frequency of employee interaction with vulnerable populations. The rule could also eliminate traditional defenses, allowing plaintiffs to succeed even when employers complied with existing standards of care.
It remains uncertain which courts will formally adopt this rule. Notably, Pennsylvania courts have declined to adopt the Third Restatement in other contexts such as products liability law, suggesting the possibility that the ALI Rule will not be adopted in this jurisdiction.
However, even without formal adoption of the rule, employers can take proactive steps to mitigate risk based upon the metrics emphasized by the ALI rule. Helpful measures can include strengthening background checks, reinforcing workplace policies, enhancing monitoring and documentation, reviewing insurance coverage, and ensuring contracts clearly allocate liability. If courts embrace this rule, companies must be prepared for a legal landscape where strict liability replaces negligence as the governing standard in sexual assault cases.
Sixth Circuit Breaks From EEOC, Limits Employer Liability for Customer Harassment
The Sixth Circuit has adopted a notably strict approach to employer liability for harassment by customers, ruling that companies can only be held responsible if the companies intended for the customer harassment to occur. This decision in Bivens v. Zep Inc. diverges from decades of U.S. Equal Employment Opportunity Commission (EEOC) guidance and rulings from multiple other federal appeals courts.
The case arose after Dorothy Bivens, a sales representative for Zep Inc., alleged she was locked in an office and propositioned by a client during a site visit. Although Zep reassigned the client after Bivens reported the incident, she was laid off soon after and claimed the termination was retaliatory and racially motivated. A federal judge granted summary judgment for Zep, and the Sixth Circuit affirmed.
In rejecting the EEOC’s negligence-based framework – which holds employers liable if they knew or should have known about harassment and failed to act – the panel emphasized that courts are not bound by EEOC interpretations. Instead, it concluded liability exists only if the employer wanted or was substantially certain that harassment would occur.
This stance on Title VII currently isolates the Sixth Circuit from other jurisdictions. However, the decision – by judges who were all appointed by President Trump – may signal a narrowing of employer liability that could expand to other jurisdictions with more conservative jurists.
Jeff Burke is an attorney at MacElree Harvey, Ltd., working in the firm’s Employment and Litigation practice groups. Jeff counsels businesses and individuals on employment practices and policies, executive compensation, employee hiring and separation issues, non-competition and other restrictive covenants, wage and hour disputes, and other employment-related matters. Jeff represents businesses and individuals in employment litigation such as employment contract disputes, workforce classification audits, and discrimination claims based upon age, sex, race, religion, disability, sexual harassment, and hostile work environment. Jeff also practices in commercial litigation as well as counsels businesses on commercial contract matters.
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