E-Alerts

Executive Order Targets "Disparate Impact" Discrimination Claims

Last month, President Trump issued an Executive Order (“EO”) entitled “Restoring Equality of Opportunity and Meritocracy,” which directs federal agencies to take various actions aimed at eliminating the “disparate impact” theory of employment discrimination liability. According to the EO, such steps are needed “to avoid violating the Constitution, Federal civil rights laws, and basic American ideals.”

The EO does not change existing anti-discrimination statutes, nor does it apply to discrimination actions brought by private parties. Nonetheless, by calling for an end to the federal government’s efforts to press disparate-impact claims, the EO may have significant effects on how discrimination claims are litigated and decided.

Disparate-Impact Claims

An employer may be found liable for discrimination under a disparate-impact theory where (i) a facially neutral policy or practice is shown to have a disproportionately negative impact on members of a protected class (such as race, national origin or gender), and (ii) the employer is unable to establish that the policy or practice is job-related and justified by “business necessity.” Unlike with “disparate treatment” discrimination claims, the absence of discriminatory intent on the employer’s part is irrelevant to this analysis.

The United States Supreme Court first recognized the disparate-impact theory in its landmark 1971 Griggs v. Duke Power Co. decision, which involved an employer’s requirement that applicants for certain jobs have a high school diploma or pass a general aptitude test. In concluding that these restrictions unfairly screened out non-white applicants and were not reasonably related to any business need, the Griggs Court held that Title VII of the Civil Rights Act of 1964 “proscribes not only overt discrimination but also practices that are fair in form, but discriminatory in operation.”

Subsequently, Congress codified the disparate-impact theory of liability into Title VII as part of the Civil Rights Act of 1991. Disparate impact has since been incorporated into other federal anti-discrimination statutes such as the Americans with Disabilities Act and the Fair Housing Act.

Executive Order

The EO aims to overturn this legal theory. According to the EO, “[d]isparate impact liability imperils the effectiveness of civil rights laws by mandating, rather than proscribing, discrimination.” Underlying this position are concerns that employers may take protected characteristics into account in their hiring decisions in order to avoid demographic imbalances that could leave them vulnerable to disparate-impact claims. Critics also maintain that the disparate-impact theory unfairly interferes with an employer’s right to determine the appropriate qualifications for its job offerings.

The EO includes a number of directives to various federal agencies intended to curtail the use and effect of disparate-impact claims:
 

• Within 30 days of the date of the EO (i.e., by May 23, 2025), the Attorney General must report to the President all existing “regulations, guidance, rules, or orders” that provide for disparate-impact liability and identify the steps to be taken by agencies to amend or repeal them.

• Within 30 days (i.e., by May 23, 2025), the Attorney General must also report to the President other laws or decisions, including state laws, that impose disparate-impact liability, and consider “any appropriate measures to address any constitutional or other legal infirmities.”

• Within 45 days (i.e., by June 7, 2025), the Attorney General and the Chair of the Equal Employment Opportunity Commission (“EEOC”) must “assess all pending investigations, civil suits, or positions taken in ongoing matters under every Federal civil rights law ... that rely on a theory of disparate-impact liability, and [ ] take appropriate action with respect to such matters consistent with the policy of this order.”

• Similarly, within 45 days (i.e., by June 7, 2025), the heads of various other agencies, including the Secretary of Housing and Urban Development, the Director of the Consumer Financial Protection Bureau and the Chair of the Federal Trade Commission, and any agencies responsible for enforcing the Equal Credit Opportunity Act and the Fair Housing Act, must “evaluate all pending proceedings that rely on theories of disparate-impact liability and take appropriate action with respect to such matters consistent with the policy of this order.”

• Within 90 days (i.e., by July 22, 2025), “all agencies shall evaluate existing consent judgments and permanent injunctions that rely on theories of disparate-impact liability” and take appropriate action consistent with the mandates of the EO.

The EO also directs the Attorney General, in coordination with other federal agencies, to determine whether any federal legal authorities “preempt state laws, regulations, policies or practices that impose disparate-impact liability based on protected characteristics such as race, sex or age” or whether such laws, regulations, policies or practices have “constitutional infirmities that warrant Federal action,” and to “take appropriate measures consistent with the policy of this order.”

Further, the EO directs the Attorney General and the EEOC to create and issue guidance to employers regarding “appropriate methods to promote equal access to employment regardless of whether an applicant has a college education.”

Implications For Employers

Most notably, the EO directs federal agencies, including the EEOC, to cease pursuing disparate-impact claims. Presumably, the EEOC and other agencies will seek to withdraw any disparate-impact lawsuits they have filed and will decline to initiate any new cases raising this legal theory. Federal agencies may also seek to undo existing consent decrees and permanent injunctions predicated on disparate-impact claims.

However, private litigants will remain free to pursue disparate-impact claims under existing federal statutes (such as Title VII) and court decisions.

Similarly, while the EO targets disparate-impact claims at the federal level, it has no effect – at least immediately – upon existing state laws. Employers in states like Massachusetts, where disparate impact claims are recognized under state statutes such as G.L. c. 151B, will remain subject to state-level requirements.

Since, however, the EO instructs the Attorney General to assess whether state laws authorizing disparate impact claims may be preempted by federal law or challenged as unconstitutional, this may lead to future legal challenges to such state laws.

Finally, employers should give attention to the EEOC’s expected formal guidance on promoting equal access to employment opportunities, as this guidance will likely signal the types of discrimination claims on which the EEOC intends to focus.

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Schwartz Hannum’s employment attorneys stand ready to assist employers with navigating these disparate-impact directives, or any other discrimination issues that may arise.