In another major shift in federal priorities, President Donald Trump's April 23 executive order directed the U.S. Equal Employment Opportunity Commission and other federal agencies to cease their pursuit of disparate impact claims in pending and future proceedings brought under Title VII of the Civil Rights Act of 1964 and other federal statutes.[1]

The executive order, titled "Restoring Equality of Opportunity and Meritocracy," is the Trump administration's latest move to promote merit-based decision-making.

It asserted that the specter of potential disparate impact liability has chilled companies from making decisions based on merit that might unintentionally lead to disproportionate outcomes that are adverse to individuals of a particular protected group.

As an example of this phenomenon, the executive order stated that employers are hesitant to use job-oriented evaluations to match applicants with positions based on their skills.

According to the executive order, the disparate impact theory of liability itself runs contrary to the principle of equal protection under the law that is enshrined in the Constitution.

Whereas the Constitution requires all citizens to be treated equally under the law, the disparate impact theory results in "favoritism" based on race and sex, and beyond the constitutional defects, it "imperils the effectiveness of civil rights laws," per the executive order.[2]

Rather than erase unlawful race discrimination, for example, the theory "all but requires" employers to engage in "racial balancing" when making employment decisions, according to the executive order.[3]

In this respect, the executive order said that the disparate impact theory runs contrary to Title VII of the Civil Rights Act, which prohibits employers from making decisions on the basis of race or other statutorily protected traits.[4]

The potential for employers to be the targets of disparate impact liability, however, survives the executive order. As explained below, the executive order does not restrain private litigants from filing disparate impact claims under Title VII, or under parallel state and local law. As such, employers should stay alert to the risk that their workplace policies and practices may produce a disparate impact on members of a protected group.

Employers will be better positioned to manage the risk that disparate impact liability continues to pose by examining the nexus between the business needs motivating a policy or practice, and the results of that policy or practice on affected members of the applicant pool or existing workforce.

Origins of the Disparate Impact Theory

The U.S. Supreme Court recognized disparate impact claims as an avenue for relief under Title VII in the landmark 1971 decision in Griggs v. Duke Power Co.[5]

The case involved a dispute over a requirement that job applicants have a high school diploma, which resulted in African-American candidates disproportionately being denied jobs as a result of having lower graduation rates compared to non-African-American candidates, for reasons having nothing to do with the employer.[6]

In concluding that the diploma requirement was not job-related and resulted in unlawful discrimination under Title VII, the Supreme Court ruled 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."[7]

In 1991, 20 years after Griggs, Congress amended Title VII to codify the disparate impact theory into the statute.[8]

How Plaintiffs Use the Disparate Impact Theory

In the decades since Griggs, litigants have wielded the disparate impact theory to attack a wide range of employment actions as discriminatory in effect, if not in intent.

To bring a Title VII claim against an employer based on the disparate impact theory, a plaintiff must show only that a specific policy or practice that is neutral on its face has nevertheless had a disproportionately negative effect on members of a certain race, sex, ethnicity or other protected group as compared with those outside the protected group.

Unlike the more common theory of disparate treatment discrimination, a plaintiff pursuing a claim of disparate impact discrimination is not required to show any intent to disadvantage a protected group.

To defend against a disparate impact claim, Title VII requires that an employer bears the burden to show that a legitimate, nondiscriminatory reason exists for the challenged employment policy or practice, and that it is consistent with business necessity.

The employer may only establish that such a business necessity exists if it can show that there is no "less discriminatory alternative" by which to achieve the same legitimate goal underlying the policy or practice, a steep hurdle to overcome.

Because disparate impact claims, by their nature, require no evidence of biased intent, plaintiffs often need to present extensive statistical evidence and expert testimony to prove their claims.

Employers that defend against such claims often present competing interpretations of the statistical data through their own analyses and experts.

Unsurprisingly, the broad scope and large scale of potential liability for disparate impact claims makes it exceedingly difficult to achieve summary judgment, pushing many defendants to settle the claims.

In practice, private plaintiffs have brought Title VII disparate impact claims targeting a myriad of employment practices, including criminal background checks, aptitude and personality tests, lifting requirements, and grooming standards, as but a few examples.

More recently, AI-based resume screening tools have been the subject of disparate impact claims.[9]

The EEOC, in its capacity as a litigant, has filed disparate impact lawsuits in courts across the country, challenging hiring prerequisites, criteria for job promotions, and factors used in reductions in force as unlawful under Title VII and various other federal statutes.[10]

In still other matters, the EEOC has entered into public settlements with employers after disparate impact claims were asserted in agency-initiated or privately filed EEOC charges.[11]

Key Provisions in the Executive Order

To effectuate the aforementioned federal policies against the use of the disparate impact theory of liability, the executive order mandates that federal agencies take several immediate actions,[12] including the following.

Reallocate enforcement resources.

All executive departments and federal agencies must "deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability" in recognition of the limited enforcement resources and the policy set forth in the executive order.

Overhaul regulations and subregulatory guidance.

The attorney general must report to the president all regulations, guidance and other authority that currently impose liability or requirements on the basis of the disparate impact theory, and outline steps for amending or repealing those authorities.

Reassess pending investigations, lawsuits, consent judgments and injunctions.

The attorney general and the chair of the EEOC must review and take appropriate action with respect to all investigations, lawsuits or other positions taken in matters pending under federal civil rights laws, including Title VII, that rely on a disparate impact theory.

Likewise, all federal agencies must evaluate consent judgments and permanent injunctions that rely on disparate impact liability and take action consistent with the executive order.

Issue guidance for employers to promote equal access to employment.

The attorney general and the chair of the EEOC must jointly "issue guidance or technical assistance to employers regarding appropriate methods to promote equal access to employment regardless of whether an applicant has a college education."

Scrutinize state laws and regulations.

The attorney general, in coordination with other federal agencies, must determine whether federal law preempts or otherwise provides a basis to challenge the legality of state laws, regulations, policies or practices that impose disparate impact liability based on a protected characteristic.

Implications for Employment Policies and Practices

The executive order makes it the policy of the U.S. to eliminate the disparate impact theory of liability "in all contexts to the maximum degree possible."

However, an executive order cannot override a statute enacted by Congress, so employees may still bring disparate impact claims under federal law based on the 1991 amendments to Title VII.

What has changed is that disparate impact plaintiffs will not be able to rely on the EEOC to prosecute their claims for them. We have no doubt that the plaintiffs bar will fill this gap.

Disparate impact plaintiffs may also obtain relief under state law. And it is possible that state civil rights agencies will prosecute disparate impact claims as a result of the EEOC refraining from doing so.

Employers should be cognizant of their obligations under state and local law in the area of disparate impact liability.

New York, California, Illinois, Colorado and Minnesota are among the many states that include disparate impact as a theory of liability in state statutes, regulations or agency guidance.

Additionally, other states and localities have endorsed the disparate impact theory of liability by way of court opinions interpreting state and local antidiscrimination laws.

But what about the argument that state law claims may be preempted by the executive order? While this will ultimately be decided by the courts, it seems unlikely that a court would find that state law recognition of disparate impact liability is preempted by federal law when disparate impact liability is enshrined in federal law.

For these reasons, employers should not abandon efforts to consider the risk of disparate impact liability posed by neutral employment policies and practices that may have a disproportionately negative effect on a protected group.

To the contrary, employers would be well advised to prioritize efforts to evaluate the potential risks of their policies and practices, and determine whether changes are necessary for legal compliance or are otherwise prudent.

In conducting a risk assessment, employers may want to focus on the following areas, which tend to be the subject of disparate impact claims.

Prerequisites to Apply for Positions

Employers may want to evaluate whether any prerequisites to be eligible to apply for jobs, such as requiring a high school diploma or college degree, are job-related and achieve the desired effect without disproportionately excluding protected groups. In this respect, employers may revisit the prerequisites identified in internal and external job postings.

Conditions for Hire

Likewise, employers may want to analyze any post-offer conditions for hire, such as passing a comprehensive background check, achieving a certain score on an aptitude test or demonstrating certain physical abilities, in order to assess the risk that the conditions impose a disparate impact on members of a protected group.

To the extent that employers use algorithm-based tools to select job applicants, it is advisable to examine the effect of those tools for disparate impact risk.

Criteria for Promotions

Employers that use examinations, ranking systems or other metrics to evaluate employees' eligibility for higher-level roles may consider taking a close look at the effect of those metrics in achieving the desired goals, along with any unintended consequences that disproportionately fall on a protected group.

Factors Used in Reductions in Force

The same analysis of criteria for promotions applies to factors that are used to determine who will be selected for layoffs as part of a reduction in force. Employers should look at the criteria they select, such as performance metrics, to see if the criteria may disproportionately fall on a protected group.

If an employer concludes that there may be disparate impact, then it needs to evaluate whether it may defend the criteria on the grounds of business necessity.

Conclusion

One of the core messages in the executive order is that employers should not hold back from making decisions based on merit or other neutral factors simply because of the specter of litigation risk.

But so long as disparate impact remains a viable legal theory, employers are well advised to at least consider this litigation risk, and the collateral public and employee relations risks, where the risk of claims is greatest.

References 

[1] Executive Order, Restoring Equality of Opportunity and Meritocracy, https://www.whitehouse.gov/presidential-actions/2025/04/restoring-equality-of-opportunity-and-meritocracy/ (Apr. 23, 2025).

[2] See id.

[3] See id.

[4] 42 U.S.C. § 2000e-2(k)(1)(A) (stating that disparate impact liability may exist under Title VII of the Civil Rights Act of 1964 ("Title VII") if a complaining party demonstrates that a respondent uses a particular employment practice that causes a disparate impact on the basis of race, color, religion, sex, or national origin and the respondent fails to demonstrate that the challenged practice is job related for the position in question and consistent with business necessity).

[5] Griggs v. Duke Power Co., 401 U.S. 424 (1971).

[6] Id. at 430-31.

[7] Id. at 429-30.

[8] 42 U.S.C. § 2000e-2(k) (stating burden of proof in Title VII disparate impact cases).

[9] See Mobley v. Workday, Inc., No. 3:23-cv-00770-RFL (N.D. Cal. Feb. 21, 2023) (alleging that software algorithm used in job applicant screening tool resulted in disparate impact against job applicants who are African American, over the age of forty, and/or who have a disability).

[10] See, e.g., EEOC v. Jet Propulsion Laboratory, No. 2:20-cv-03131 (C.D. Cal. 2020) (alleging that employer's layoff practices had a disparate impact on employees aged 40 or older); EEOC v. Stan Koch & Sons Trucking, Inc., No. 0:19-cv-02148 (D. Minn. 2019) (alleging that trucking company's use of a strength test had a disparate impact on female candidates for driver jobs); EEOC v. Jacksonville Association of Firefighters, Local 122, IAFF, No. 3:12-cv-491 (M.D. Fla. 2012) (alleging that a fire department's use of an examination for promotion decisions had a disparate impact on African American employees).

[11] See, e.g., EEOC v. Scrub, Inc., No. 09-cv-4228 (N.D. Ill. consent decree entered Nov. 9, 2010) (settlement of EEOC-initiated charge filed against janitorial services company following the EEOC's allegations of disparate impact discrimination on the basis of race arising from the company's recruitment and hiring practices); EEOC, Press Release, "Clarksburg JATC to Pay $150,000 to Settle EEOC Sex Discrimination Charge" (Sept. 29, 2023) (announcing agreement between EEOC and an entity that oversees an electrician apprenticeship program to resolve EEOC charges of sex discrimination initiated by private parties involving allegations of, among other things, use of a panel interview and rank-order selection process that created a disparate impact against a class of female applicants).

[12] See Executive Order, Restoring Equality of Opportunity and Meritocracy, supra.

Reprinted with permission of Law360.