Employment Law Report
New Executive Order Seeks to End Enforcement of Disparate Impact Claims
By: Sharon Gold
The vast majority of employment discrimination claims against employers are based on a disparate treatment theory, where the employee alleges that he or she suffered an adverse employment action (such as termination, denied promotion, etc.) because of his or her race, sex, national origin, religion, age or disability. Disparate impact claims, on the other hand, are based on the theory that there is a facially neutral policy that has a disproportionately harmful effect on a protected class. Examples include: employment tests that harm the ability of applicants who have mental health issues; reductions in force that statistically impact persons over forty more than those under forty; or strength or height requirements that negatively impact females’ ability to obtain a job. Once the employee proves a disproportionately harmful impact on a particular protected class, the employer can still defeat the claim if it shows that the policy or practice is job-related for the position or consistent with a business necessity, and that no other alternative requirement would suffice.
On April 23, 2025, President Trump signed an Executive Order (EO) entitled “RESTORING EQUALITY OF OPPORTUNITY AND MERITOCRACY” that does the following:
- Revokes Presidential approval of regulations and/or portions of regulations for Title VII that concern disparate impact.
- Directs federal agencies to deprioritize enforcement of all statutes and regulations for Title VII and Title VI concerning disparate impact.
- Directs the Attorney General to repeal or amend regulations for Title VI concerning disparate impact and to report to the president about federal and state laws or regulations concerning disparate impact.
- Directs the Attorney General and the Chair of the EEOC to assess all pending agency matters relating to disparate impact under Title VII.
- Directs the Attorney General, Chair of the EEOC, Secretary of Housing and Urban Development, Director of Financial Protection Bureau, Chair of the Federal Trade Commission, and any other head of an agency responsible for enforcing the Equal Credit Opportunity Act, Title VIII of the Civil Rights Act of 1964 (the Fair Housing Act), or laws prohibiting unfair, deceptive, or abusive acts or practices, to evaluate pending matters relying on disparate impact liability and to take action consistent with the EO.
- Directs the Attorney General to determine whether Federal authorities preempt any disparate impact state laws.
- Directs the Attorney General and the Chair of the EEOC to formulate and issue guidance to employers “regarding appropriate methods to promote equal access to employment regardless of whether an applicant has a college education, where appropriate.”
The EO states that “disparate-impact liability 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. This has made it difficult, and in some cases impossible, for employers to use bona fide job-oriented evaluations when recruiting, which prevents job seekers from being paired with jobs to which their skills are most suited — in other words, it deprives them of opportunities for success. Because of disparate-impact liability, employers cannot act in the best interests of the job applicant, the employer, and the American public. Disparate-impact liability imperils the effectiveness of civil rights laws by mandating, rather than proscribing, discrimination.” The EO reflects a shift in priorities from previous administrations and ignores the employer’s affirmative defense of the policy or practice being job-related or consistent with a business necessity.
It is important to note that the EO does not, nor can it, repeal Title VII’s disparate impact claim because that claim is statutory, which would require Congressional or Supreme Court action. In addition, while the EO does not specifically mention the Americans with Disabilities Act or the Age Discrimination in Employment Act, it is most likely that the EEOC will take the same stance on age or disability claims as is set forth in the EO. What should employers do now when there is a potential statutory disparate impact claim, but the EO instructs that disparate impact protections could lead to disparate treatment claims?
- If an employer has an agency action currently pending, or a consent decree or permanent injunction that concerns disparate impact, seek legal counsel about the effect of the EO.
- Analyze current employment requirements for the appropriateness of requiring a college degree.
- Be alert for regulations from the AG or EEOC concerning equal access to employment.
- Consult legal counsel about any employment tests or requirements and whether they create barriers or favor certain protected classes.
- Consult legal counsel whenever implementing a reduction in force.
- If conducting a disparate impact analysis, be sure to have legal counsel prepare it so that it will be subject to attorney-client privilege.
Employers should monitor developments for forthcoming guidance or regulations concerning disparate impact claims. Our team is happy to advise you on these developments.
