New Executive Order On Disparate Impact Liability – What Does This Mean For Employers?
On April 23, 2025, President Trump issued the Restoring Equality of Opportunity and Meritocracy Executive Order (EO) which argues that disparate impact liability violates the “Constitution, Federal civil rights laws, and basic American ideals.” The EO requires all federal agencies, such as the Equal Employment Opportunity Commission (EEOC), to “deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability.” It also requires the Attorney General to “initiate appropriate action to repeal or amend” Title VII’s regulations to eliminate disparate impact liability.
“Disparate impact liability” refers to a lesser-used theory of discrimination an employee can assert under laws like Title VII of the Civil Rights Act of 1964. An employee or group of employees can argue that a policy or practice of an employer which appears neutral actually has a disparate, discriminatory impact on those of a protected class.
This theory was first recognized by the U.S. Supreme Court in 1971, where a group of African American employees argued that an employer’s requirement of a high school diploma or intelligence test was discriminatory because it operated to disqualify them at a substantially higher rate than other applicants. The Court ruled that Title VII requires the elimination of “artificial, arbitrary, and unnecessary barriers to employment that operate invidiously to discriminate on the basis of race” and explained that “practices, procedures, or tests neutral on their face, and even neutral in terms of intent, cannot be maintained if they operate to ‘freeze’ the status quo of prior discriminatory employment practices.”
While President Trump has declared the disparate impact theory “unlawful,” the issue is ultimately up to the courts or Congress. The effect of this new EO will instead be seen in the federal agencies. For example, the EEOC will not conduct disparate impact investigations against employers while the EO remains in effect or file lawsuits asserting this theory. However, employees will still be able to pursue discrimination claims under the disparate impact theory in their own lawsuits. Thus, employers should continue to guard against this type of liability by ensuring that policies and practices are necessary, demonstrably job related, and are not having a disparate impact on protected classes.
In short, there is nothing different or new employers should do in response to this new EO. Instead, keep an eye on this issue. It is interesting to note that when the Supreme Court approved the disparate impact theory it did not sanction preferences and instead expressly stated: Title VII “does not command that any person be hired simply because he was formerly the subject of discrimination, or because he is a member of a minority group. Discriminatory preference for any group, minority or majority, is precisely and only what Congress has proscribed.”
As always, if you have questions about this issue, please contact a KZA attorney.
KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.