Labor & Employment Developments Blog

On April 23, 2025, President Trump issued an Executive Order entitled “Restoring Equality of Opportunity and Meritocracy,” directing federal agencies to effectively end the use of “disparate impact” liability in enforcing anti-discrimination laws. This order marks a significant shift in how employers must assess their employment policies and practices, as well as how those policies and practices impact employees.

What is Disparate Impact Liability? Disparate impact liability is a long-standing legal theory under federal anti-discrimination law, most notably codified in Title VII. Unlike disparate treatment, which involves intentional or clear discrimination, disparate impact focuses on otherwise neutral employment practices that disproportionately affect members of a protected class.

Under this theory, an employer may be liable for discrimination if a policy or employment practice causes a significant difference in outcomes or adverse effects on a protected group and is not shown to be job-related and consistent with a business necessity, even if there is no facially discriminatory policy, practice, or intent. This theory has been upheld in several landmark court cases, but now faces scrutiny from the Trump Administration.

Impact of the Executive Order: President Trump’s Executive Order asserts that the application of disparate impact liability is inconsistent with the principle of equal protection under the law and is, therefore, unconstitutional. Thus, the Executive Order instructs federal agencies to “deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability.” This instruction will effectively halt federal investigations, lawsuits, and regulatory actions that involve or rely upon this theory of discrimination.

The Order further directs the Chair of the Equal Employment Opportunity Commission and Attorney General to review all pending investigations, civil suits, and enforcement actions that involve the disparate-impact theory and to issue joint guidance for employers regarding the appropriate methods to promote equal access to employment opportunities. Ultimately, this Executive Order posits the Trump Administration’s position that disparate impact theory promotes discriminatory practices and undermines meritocracy in hiring and advancement.  Indeed, the Executive Order specifically provides that disparate impact liability “imperils the effectiveness of civil rights laws by mandating, rather than proscribing, discrimination” and “threatens the commitment to merit and equality of opportunity that forms the foundation of the American Dream.”

Key Takeaways for Employers: Although President Trump’s Executive Orders and policies have faced legal challenges, this Executive Order is likely to stall pending claims involving disparate impact liability. The Executive Order is also likely to reduce the number of new claims raised by employees based on the disparate impact theory – at least for now. The KMK Labor and Employment team will continue to monitor forthcoming guidance from the EEOC and Department of Justice and is available to advise employers on their employment practices.