New Executive Order: Trump Curbs Use of Disparate Impact Theory

On April 23, President Trump signed an executive order instructing federal agencies, including the EEOC, not to rely on disparate impact theory when enforcing federal civil rights laws.

In other words, the executive order says that just because a company policy ends up having a negative effect on a protected class, like age, race or sex, that alone isn’t enough for the government to say it’s discriminatory. According to this new order, unless there’s clear proof that the policy was meant to treat people unfairly, agencies like the EEOC shouldn’t take legal action based on those outcomes alone.

However, that stance doesn’t align with some established legal principles. So let’s take a closer look at:

• What’s in the order
• What disparate impact is, and
• What it means for HR and employers.

What the Order Says

Restoring Equality of Opportunity and Meritocracy reiterates the Trump administration’s preference for merit-based initiatives over DEI initiatives and calls disparate-impact liability “a key tool” of the DEI movement. 

According to the executive order, disparate-impact liability “runs contrary to equal protection under the law and, therefore, violates our Constitution.” 

A White House Fact Sheet explains that the order:

• Revokes prior presidential actions that approved of disparate-impact liability
• Directs all agencies to deprioritize the enforcement of statutes and regulations that include disparate-impact liability
• Instructs the Attorney General to repeal or amend all Title VI regulations on race discrimination that consider disparate-impact liability, and
• Directs the administration to assess all pending investigations, lawsuits and consent judgments that rely on a theory of disparate-impact liability and take appropriate action.

What is Disparate Impact?

Under Title VII, there are two key ways to establish a valid discrimination claim: 1) disparate treatment, and 2) disparate impact.

Let’s start with the basics: A disparate treatment claim is the one most people think of when they think about a discrimination complaint. This type of claim alleges that an employer intentionally or deliberately discriminated against an employee or applicant. 

But our focus – and the executive order’s focus – is on the second type: disparate impact.

A disparate impact claim asserts that even a seemingly neutral, nondiscriminatory practice or policy can violate the law because they have a disproportionate negative impact on a protected class, like age, race or sex. 

Disparate Impact Example

The concept can be abstract, so let’s look at a real-world example to see what this might look like in the workplace.

In 1971, a North Carolina power plant required employees to possess a high school diploma or pass an intelligence test as a condition of employment for certain positions. Those requirements were challenged in court.

At the time, Blacks in the area were less likely than whites to have graduated from high school and were also less likely to pass the intelligence test due to their lack of education. Moreover, there were employees already in the position who had not graduated from high school and had not taken the intelligence test, and they were performing their jobs well. These requirements weren’t necessary to do the work, and they disproportionately excluded Black applicants, according to the complaint.

When the case reached the U.S. Supreme Court, it held that if a practice excludes minorities and that practice cannot be shown to be related to job performance, it is prohibited, even if the employer lacked discriminatory intent.

Title VII does not preclude the use of testing or measuring procedures, so long as they are demonstrably a reasonable measure of job performance. But in this case, the procedures were not related to job performance. Therefore, they violated Title VII, the Court determined.

The decision established the legal foundation for the disparate impact theory of discrimination under Title VII and became a landmark case in the area of civil rights.

Griggs v. Duke Power Co., 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971).

Disparate Impact is an Established Legal Practice 

After the Court’s ruling in Griggs, the EEOC adopted its longstanding practice of using disparate impact analysis as one of two key ways to show discrimination under Title VII, as noted above.

Moreover, in 1991, an amendment was passed, clarifying that Title VII prohibits company policies that seem fair on the surface but end up disproportionately harming people in a protected class – unless the employer can prove the policy is directly related to the job and necessary for the business. 

Plus, 42 U.S. Code § 2000e-2, in section K, outlines the burden of proof in disparate impact cases.

In other words, “disparate impact isn’t some rogue theory. It’s baked into the statute,” according to employment attorney Eric Meyer of the firm Pierson Ferdinand LLP.

Former EEOC Commissioner Chai Feldblum posted about the executive order in a LinkedIn post, noting, “Title VII explicitly allows use of a disparate impact claim, as does the ADA, the ADEA, the Fair Housing Act and Title VI regulations. An EO obviously cannot override those laws.”

What Does It Mean for HR?

The key takeaway for HR is that Title VII remains in force – including its provisions on disparate impact. This executive order does not change the statute or remove the risk of disparate impact claims.

What’s likely to change is how federal agencies prioritize enforcement. For example, HR teams may see fewer disparate impact claims brought by the EEOC and more focus on other areas, such as alleged “DEI-motivated” discrimination or national origin bias.

In FY 2024, the EEOC filed 111 merit lawsuits, with nearly 60% involving Title VII claims. A reallocation of resources could reduce that share and shift attention elsewhere.

Keep an eye out for legal developments and agency guidance. The EEOC and DOL may adjust their enforcement strategies in response to this order.

For the latest updates on executive orders affecting HR, take a look at New Executive Orders: What HR Should Know for Trump 2.0.