Unlike the disparate treatment theory of liability, the disparate impact theory requires no showing of intent to discriminate.

On April 23, 2025, President Donald Trump issued an executive order entitled “Restoring Equality of Opportunity and Meritocracy,” categorically rejecting use of the “disparate impact” theory of liability by the Equal Employment Opportunity Commission (EEOC) and other federal agencies as unlawful in itself. The executive order singles out the theory as hindering businesses from making merit-based decisions that might unintentionally lead to disparate outcomes for members of a particular race, sex or other protected group, and thereby prompt lawsuits. Rather than rooting out unlawful discrimination, the executive order states the disparate impact theory has had a perverse effect as it “all but requires” employers to consider race in making employment decisions.

The disparate impact theory of liability originated with the Supreme Court with the decision in Griggs v. Duke Power Co., 401 U.S. 424 (1971); Congress codified the disparate impact theory of liability into the Title VII statute in 1991. In the decades since, plaintiffs have sued employers under Title VII and other statutes, including the Americans with Disabilities Act, to target criminal background checks, aptitude tests, ratings systems, English-only rules, lifting requirements and other measures as unlawful based on disparate impact to a protected group. Recently, plaintiffs have used the theory to argue that the algorithms underlying AI hiring tools have the disproportionate effect of screening out applicants on the basis of race, ethnicity and sex.

Unlike the disparate treatment theory of liability, the disparate impact theory requires no showing of intent to discriminate. To bring a disparate impact claim, a plaintiff must show only that a facially neutral employment policy or practice has had a disproportionately negative effect on a particular group. Often, proof of the claim requires extensive statistical evidence and expert testimony.

To defend Title VII disparate impact claims, employers must show that there a legitimate, nondiscriminatory reason for their employment policy or practice that is consistent with business necessity. To establish business necessity, the employer must show there is no “less discriminatory alternative” to achieve the same legitimate goal, a high burden to meet.

President Trump’s April 23 order directs the EEOC and other federal agencies to take the following actions, among other steps:

1. Within 30 days of the order, the U.S. attorney general must report to the president all existing regulations, guidance, rules or orders that impose disparate impact liability “or similar requirements” and detail steps for their amendment or repeal.
2. Within 45 days of the order, the attorney general and chair of the EEOC must assess all pending investigations, civil suits or positions taken in ongoing matters under every federal civil rights law, including Title VII, that rely on a theory of disparate impact liability and take appropriate action consistent with the order.
3. Within 90 days of the order, all federal agencies must evaluate consent judgments and permanent injunctions that rely on disparate impact liability and take appropriate action consistent with the order.
4. The EEOC and the DOJ jointly must issue guidance or technical assistance regarding appropriate methods to promote equal access to employment, regardless of whether a job applicant has a college education.
5. The attorney general, in coordination with other federal agencies, must determine whether state laws that impose disparate impact liability based on a protected characteristic are preempted by federal law or otherwise have constitutional defects warranting federal action, and take appropriate measures accordingly.

Importantly, the order does not prohibit private plaintiffs from pursuing disparate impact claims against private employers under Title VII or other federal statutes. While the EEOC likely will not pursue these claims on behalf of private plaintiffs, we expect private plaintiffs to continue to file these charges with the EEOC but to seek right-to-sue letters from the EEOC to file in federal court sooner rather than later. It will ultimately be for the courts to determine what effect the executive order has on existing disparate impact case law.

We also expect private plaintiffs to file disparate treatment claims under state law. Disparate impact liability is well-established under many states’ anti-discrimination laws covering private employers. New York, California, Illinois, Colorado and Minnesota are among the states that include disparate impact as a theory of liability in state statutes, regulations or agency guidance. Other states have begun taking steps to codify the disparate impact theory in state law. For instance, in February 2025, Maryland legislators introduced a bill to add the disparate impact theory to the Maryland anti-discrimination law. And still other states have endorsed the disparate impact theory of liability by way of court opinions.

However, as noted above, the executive order appears to set the stage for an argument that state law endorsement of disparate impact liability is inconsistent with federal public policy as set forth in the executive order. We express no opinion on the potential success of a preemption argument. Ultimately, that issue also will be decided by the courts. Until then, employers are well advised to continue to consider the risk of disparate impact liability with regard to employment policies and practices that may have a disproportionate negative effect on a protected group.

The April 23 executive order represents the latest shift in federal strategic enforcement priorities to emphasize merit-based decision-making by employers. Employers should consider taking immediate steps to evaluate their policies and practices in light of the administration’s priorities and determine whether changes are necessary or prudent. It may be advisable to undertake such efforts with counsel under attorney-client privilege.

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