Trump Executive Order Calls Disparate-Impact Liability Unlawful

In a groundbreaking executive order (EO) issued April 23, President Donald Trump called disparate-impact liability — a common basis for lawsuits under anti-discrimination laws — unlawful. Disparate-impact liability makes employers’ seemingly neutral practices, such as job applicant tests, unlawful if they have a discriminatory effect, even without any discriminatory statements or intent. If this type of liability plummets as a result of this EO, HR professionals could see a dip in litigation against their employers. 

In the EO, “Restoring Equality of Opportunity and Meritocracy,” Trump ordered the acting chair of the U.S. Equal Employment Opportunity Commission (EEOC), Andrea Lucas, to assess and “take appropriate action” on all pending investigations, civil suits, or positions taken under every federal civil rights law in the EEOC’s jurisdiction — including Title VII of the Civil Rights Act of 1964 — that rely on a theory of disparate-impact liability.

Trump also ordered Attorney General Pam Bondi to report to him within 30 days of the order:

• All existing regulations, guidance, rules, or orders that impose disparate-impact liability or similar requirements, and detail agency steps for their amendment or repeal, as appropriate under applicable law.
• Other laws or decisions, including at the state level, that impose disparate-impact liability and any appropriate measures to address any constitutional or other legal infirmities.

SHRM Q&A: Anti-Discrimination Laws

What Is Disparate Impact?

Title VII protects individuals from workplace discrimination based on characteristics such as race, gender, or religion. It addresses two main types of discrimination. The first is called disparate treatment, which refers to intentional discrimination — when someone is treated unfairly because of a protected trait, such as being paid less or denied a promotion. The second is known as disparate impact or adverse impact, which involves employment policies or practices that appear neutral but end up affecting certain groups more than others, even if there was no intent to discriminate. Both forms are prohibited under Title VII.

Few businesses today intentionally discriminate in employment based on race, sex, religion, or other protected characteristics and adverse-impact discrimination claims are much more common.

“Adverse impact” refers to employment practices that appear neutral but have a discriminatory effect on a protected group. Adverse impact could occur in hiring, promotions, training and development, transfers, layoffs, and performance appraisals. It might be found in an overall procedure or in any step in the process. 

Adverse impact is often used interchangeably with “disparate impact,” a legal term coined in a significant 1971 U.S. Supreme Court ruling (Griggs v. Duke Power Co.). Adverse impact can be a result of systemic discrimination which has received greater scrutiny from the EEOC in recent years. Systemic discrimination refers to structures — such as word-of-mouth recruiting — that may shape the work environment in violation of anti-discrimination laws.

An employer may be held liable for disparate-impact discrimination if they cannot show that the challenged practice is job-related and consistent with business necessity, and if they refuse to adopt an alternative practice that would meet the same goals with less discriminatory impact.

Toolkit: Managing Equal Employment Opportunity

Supporters and Opponents of Disparate-Impact Theory

Proponents of of allowing for the continued use of disparate impact in employment discrimination cases say it’s essential because “smoking gun” evidence to show intentional discrimination is rare. 

However, opponents of disparate-impact liability counter that proving discrimination should require evidence that someone intended to treat an individual differently in decision-making because of a prohibited characteristic such as race or gender. 

Disparate-impact liability “holds that a near insurmountable presumption of unlawful discrimination exists where there are any differences in outcomes in certain circumstances among different races, sexes, or similar groups, even if there is no facially discriminatory policy or practice or discriminatory intent involved, and even if everyone has an equal opportunity to succeed,” the EO said. “Disparate-impact liability all but requires individuals and businesses to consider race and engage in racial balancing” to avoid potentially massive legal liability. 

The EO continued, “It not only undermines our national values, but also runs contrary to equal protection under the law and, therefore, violates our Constitution.”

The prohibition of disparate-impact discrimination has been a core protection provided by civil rights laws, the National Women’s Law Center in Washington, D.C., said in a statement opposing Trump’s action. “This executive order instructs the government to stop enforcing key civil rights protections — in the workplace, at schools, and in all aspects of our society,” said center President and CEO Fatima Goss Graves, “and to rewrite regulations that have protected the rights of all people for decades.”