New Executive Order Targets Disparate-Impact Liability in Federal Regulations
In recent months, the Trump administration has issued a series of Executive Orders, many of which may have vast implications for employment policies and procedures. Recently, the Trump administration issued an Executive Order entitled “Restoring Equality of Opportunity and Meritocracy” (“EO”) targeting disparate impact liability as “all but requir[ing] individuals and businesses to consider race and engage in racial balancing to avoid potentially crippling legal liability”. This alert summarizes the potential impact of this EO for employers.
What is Disparate Impact Liability?
Disparate impact liability is a legal theory used to challenge practices that are neutral on their face but have a disproportionately adverse effect on a protected group. Disparate impact liability does not require proof of discriminatory intent. Instead, it requires only that the practice in question has a significant adverse impact on a protected class. The U.S. Supreme Court first recognized the concept of disparate impact in the employment discrimination context in Griggs v. Duke Power Co., 401 U.S. 424 (1971) wherein the Court invalidated an employer’s requirement that job applicants be high school graduates or pass an “intelligence” test because that requirement disproportionately eliminated Black job seekers from consideration without a justifiable basis. Currently, to defend a claim of disparate impact liability, the employer must show that the specific challenged practice is job related and consistent with business necessity. A plaintiff may still succeed, however, by showing there was another option that had less of a disparate impact and still met the employer’s needs but which the employer refused to adopt.
“Restoring Equality of Opportunity and Meritocracy”
In its April 23, 2025 EO, the Trump Administration directs federal agencies to “eliminate the use of disparate-impact liability in all contexts to the maximum degree possible” because it “has hindered businesses from making hiring and other employment decisions based on merit and skill, their needs, or the needs of their customers because of the specter that such a process might lead to disparate outcomes, and thus disparate-impact lawsuits.”
To that end, the EO directs federal agencies to deprioritize enforcement of all statutes and regulations that contemplate disparate impact liability. Additionally, the EO directs the Attorney General to initiate appropriate action to repeal or amend the regulations for Title VI of the Civil Rights Act, which prohibits discrimination based on race, color, or national origin in programs and activities that receive federal financial assistance. Within 30 days, the Attorney General and other agency heads are also required to detail steps for amending or repealing all other regulations, guidance, rules, and orders that impose disparate-impact requirements and to identify other laws or decisions, including state laws and decisions, which permit disparate-impact liability. The EO explicitly notes that the Attorney General shall determine whether these state laws, regulations or practices are pre-empted by federal law and take appropriate action. Similarly, the Attorney General and chair of the Equal Employment Opportunity Commission (“EEOC”) (as well as certain other agency heads) are directed to assess all pending investigations and lawsuits that rely on a theory of disparate-impact liability and “take appropriate action” within 45 days of the EO. Finally, within 90 days, all federal agencies are directed to do the same for consent judgments and permanent injunctions.
In lieu of pursuing theories of disparate impact, the EO instructs the EEOC and the Attorney General to consider issuing guidance focusing on promoting equal access to employment regardless of whether an applicant has a college education, where appropriate.
Impact of EO
Because the EO fails to define what constitutes “appropriate action,” its precise impact is unknown but potentially significant. For instance, the EEOC may stop investigating cases relying on disparate impact liability. However, federal anti-discrimination laws and relevant court precedent remain unchanged. In fact, the disparate impact liability framework is codified in Title VII of the Civil Rights Act (42 U.S.C. §2000e-2(k)). Similarly, despite the EO’s call for the Attorney General to determine whether state laws are “preempt[ed]” by federal authority, many states and localities continue to recognize disparate impact claims. Accordingly, employers must continue to evaluate practices under federal, state, and local law, as the EO is yet to change any existing law.
The Firm will be closely monitoring these developments, additional guidance, and any associated legal challenges. In the interim, employers should continue to consult with counsel when undertaking decisions such as implementation of pre-employment testing, using Artificial Intelligence for certain processes, mass layoffs, and/or other large-scale practices or decisions. Employers with questions about disparate impact liability or related concerns should contact Sabrina Jorge at sjorge@fglawllc.com or any other attorney at the Firm.
DISCLAIMER: This alert is provided to clients and friends of the firm for informational purposes only and the distribution of this alert is not intended to, and does not, establish an attorney-client relationship. This alert also does not provide or offer legal advice or opinions on any specific factual situations or matters. This communication may be considered Attorney Advertising. Prior results do not guarantee a similar outcome.