The End of Disparate Impact Claims? Executive Order Calls Into Question Common Theory of Liability

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Last week, President Donald Trump issued an executive order (“EO”) titled Restoring Equality of Opportunity and Meritocracy, which targets disparate impact as a theory of liability for discrimination cases.

Generally speaking, proving discrimination through “disparate impact” allows an employee plaintiff to demonstrate that an otherwise facially neutral employment practice, test, or policy has a disproportionately adverse impact on a protected class under civil rights laws. Plaintiffs claiming discrimination can use disparate impact to avoid having to prove that an employer intended to discriminate against an individual employee. For example, requiring applicants to undergo a strength test is not intended to be discriminatory but could show to have a disproportionate disparate impact on female applicants. After being first recognized by the Supreme Court in 1971, Congress codified disparate impact into Title VII of the Civil Rights Act in 1991, and thereafter, employers having to defend a properly pleaded disparate impact case must prove that the challenged practice is job related for the position and consistent with business necessity. Disparate impact cases can involve in-depth statistical analysis and are therefore often time-consuming and costly to employers.

The EO states simply that “[i]t is the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible to avoid violating the Constitution, Federal civil rights laws, and basic American ideals.” Referring to long-standing disparate impact theory as a “pernicious movement,” the EO has several calls to action of note that could ultimately impact private employers:

• The EO directs federal agencies to deprioritize enforcement of all statutes and regulations to the extent they include disparate impact liability, including but not limited to Title VII.

• Also within this directive, the Equal Employment Opportunity Commission (“EEOC”) Chair and Attorney General—within 45 days—must assess all pending investigations, civil suits, or positions taken in ongoing matters within respective jurisdictions and identity those relying on disparate impact theory. Once again directly citing Title VII, the EO requires “appropriate action with respect to such matters” to ensure consistency with the order.  Practically speaking, this means it is unlikely that the EEOC will investigate charges relying on disparate impact liability under Title VII, and may even to move to voluntarily dismiss pending suits.

• The EO also tasks the Attorney General and the EEOC Chair to jointly formulate and issue guidance or technical assistance to employers regarding appropriate methods to promote equal employment opportunities. This forthcoming guidance should provide insight and clarity on how the EEOC interprets this directive in conjunction with the law, and how this may impact enforcement activities.

Unless and until changed by Congress, the disparate impact theory of liability is still a viable cause of action under Title VII, and employers should continue to monitor their practices to ensure compliance. While the EO directs the Attorney General to review and report state-level laws that impose disparate impact liability, in practice this EO will have a limited effect on private employers for the time being, and will likely be challenged. Accordingly, private employers should continue to abide by both applicable state and federal level antidiscrimination laws—including those that rely on the disparate impact theory—until Congress amends the federal law or the Supreme Court rules on the issue. However, while the laws are still valid, this EO makes it clear that this administration continues to roll back federal enforcement of laws targeting discrimination in the workplace, and may influence or impact future lawmaking.

Employers should still be mindful of disparate impact claims, despite this development. When faced with any type of discrimination claim or threat, employers should consult outside counsel for compliance with applicable laws. For additional information or assistance, contact Maynard Nexsen’s Employment and Labor Law Team.