Trump’s Disparate Impact Shift Tees Up State Law Compliance Risk

President Donald Trump’s rollback of disparate impact enforcement will pose compliance difficulties for employers, as state laws and federal civil rights statutes currently incorporate the theory on unintentional bias.

Trump’s recent executive order told the US Justice Department and the Equal Employment Opportunity Commission to cut disparate impact liability theory to the “maximum degree possible” when enforcing civil rights laws and reconsider the government’s positions in pending litigation.

Disparate impact, codified in 1991 amendments to Title VII of the 1964 Civil Rights Act, covers discrimination resulting from neutrally applied workplace practices that disproportionately affect individuals based on their race, sex, or other protected characteristics.

Eliminating it from federal civil rights law enforcement creates a fragmented legal environment, particularly for multistate employers, as states from California to Texas have codified the doctrine, and private litigation is still viable nationwide. The April 23 Trump EO’s request that the DOJ explore whether it can preempt state law on disparate impact only adds to the uncertainty.

Subjecting employers to conflicting sets of compliance rules “would be hard to navigate,” said Joseph Seiner, a law professor at the University of South Carolina and former EEOC appellate attorney.

The administration’s shift will encourage more workers to pursue claims through the states where they have stronger anti-bias protections and remedies, he said. “You would also have some states start to follow the federal government’s approach, depending upon the politics of that particular state,” Seiner said.

The use of aptitude or personality tests to screen job applicants, for example, historically has drawn disparate impact claims under federal and state laws. If employers stop statistically verifying that these tests don’t cause unintentional discrimination, because of federal enforcement shifts, they could raise their risk of a state-law claim.

Disparate impact’s proponents argue that it pushes employers to remove unnecessary barriers to employment that lack a legitimate business purpose. Some critics view it as creating unfair employer liability, complaining that it focuses on outcomes over intent.

“The problem with the disparate impact theory is that it’s not intentional discrimination. Oftentimes, the challenges come based on a statistical impact,” said Patricia Anderson Pryor, a managing principal at Jackson Lewis PC. “Employers might feel pressured” to treat employees differently based on protected characteristics to prevent disparities, arguably causing discrimination.

Preemption Debated

US Attorney General Pam Bondi’s directive to examine state preemption raised skepticism among legal scholars, who say states retain certain powers so long as they don’t directly contradict federal law.

Federal law sets the minimum standard for bias protections, but states can provide workers more.

Bondi is likely to press the preemption effort, said Jonathan A. Segal, partner at Duane Morris LLP. The AG could declare state-law coverage of disparate impact claims violates federal public policy as established by the EO, a move that could draw legal challenges.

“I see them creating an argument that employers could assert in court,” as a defense against disparate impact claims, he said.

The EO can’t preempt states’ disparate impact enforcement, but “it puts in the minds of lawyers that, ‘hey, we should challenge this more,’” during private litigation, Pryor said.

Regardless of preemption, Trump’s move does not prevent private plaintiffs from bringing disparate impact litigation, since the US Supreme Court blessed disparate impact claims under Title VII in 1971’s Griggs v. Duke Power Co.

States including Illinois, Minnesota, New York, Texas, California, and Rhode Island, plus some localities, explicitly recognize disparate impact in employment bias statutes. Case law in other states has validated those claims. Maine allows disparate impact claims but limits damages.

Legislative sessions this year offered hints of how red and blue states might diverge following Trump’s order.

Maryland lawmakers considered legislation barring employment practices with discriminatory effects “regardless of intent.”

Meanwhile, Iowa became perhaps the first state to remove a protected trait from its anti-discrimination laws, erasing its ban on gender identity bias. Tennessee lawmakers eliminated the state’s Human Rights Commission and shifted its duties to the Republican-run attorney general’s office.

“What we’re going to have is very much a patchwork of civil rights enforcement,” said Feroza Freeland, southern policy director for the advocacy group A Better Balance.

Immediate Impact

The administration has already begun abandoning disparate impact claims in DOJ-led lawsuits involving public employers.

The agency recently moved to drop cases or vacate consent decrees reached by previous administrations to address hiring practices at local government agencies, including police and fire departments, that allegedly discriminated against racial minorities.

Cases against government agencies are common because they generally use written exams, physical ability tests, and other screening tools designed to ensure merit-based hiring that can sometimes yield gender or racial disparities, legal scholars said.

Trump’s order signals the administration is identifying areas to challenge disparate impact’s application, said Miriam A. Cherry, a professor at St. John’s University School of Law. It may intervene in private litigation by White litigants challenging diversity efforts and pre-hiring assessments enacted to remedy perceived disparities, she said.

“It’s pretty clear what states could do” under their laws on issues where disparate impact is observed, she said.

In addition to halting disparate impact enforcement, Trump’s order tells the EEOC and DOJ to jointly issue guidance for employers to broaden access to employment regardless of whether an applicant has a college degree. The move seems to encourage alternatives like skills-based hiring without consideration of disparate impact, employment law scholars said.

“Employers would be taking great risks if they rely on EEOC technical assistance or guidance” that doesn’t acknowledge disparate impact because it’s “actually written into the statute” after Griggs established it, said Patrick Shea, a partner at management-side firm Paul Hastings LLP.

“If an employer is sued based on disparate impact theory, I don’t think it’s going to derive any protection by relying on the tactical guidance,” he said. A court is still going to say, ‘I have to decide whether the disparate impact theory exists.’ Currently, it does exist.”