Through executive actions, President Trump has issued orders addressing diversity, equity and inclusion (DEI) initiatives, federal contractor minimum wage and affirmative action obligations, among many others. And on April 23, 2025, President Trump continued to change the federal government’s priorities and policies by signing an executive order requiring federal agencies to deprioritize discrimination enforcement efforts based on the disparate impact theory of liability, among other things.
What is Disparate Impact?
When an employee argues that their employer discriminated against them, the two main theories of liability are disparate treatment and disparate impact. Disparate treatment discrimination can occur when an employee who belongs to a protected class is treated differently, specifically because of their protected class.
“Disparate impact” is a theory of liability where an employer’s neutral policy has an unequal or disproportionate effect (i.e., disparate impact) on individuals based on a protected characteristic such as gender, age or race. This might include, for example, job applicant testing and education or physical requirements.
If a policy has a disparate impact on a protected group, it is deemed unlawful unless the employer can establish a valid defense, for example, showing that the policy serves a legitimate nondiscriminatory purpose that is consistent with business necessity and that another effective, less discriminatory policy doesn’t exist that would accomplish the business purpose.
Notably, disparate impact theory is based on the policy’s effects — not the policy’s intent — meaning employers can be liable regardless of their motivations.
What Does the Executive Order Do?
The recent executive order takes aim at disparate impact theory by:
- Revoking past presidential actions that approved disparate impact liability.
- Directing federal agencies to deprioritize enforcement of statutes and regulations that include disparate impact liability.
- Instructing the Attorney General to repeal or amend all Title VI racial discrimination regulations to the extent they contemplate disparate impact liability.
- Directing federal agencies, including the U.S. Equal Employment Opportunity Commission (EEOC), to assess all pending investigations, civil suits, proceedings and consent judgements that rely on disparate impact theory and take actions consistent with the order.
- Ordering the Attorney General to determine whether any federal authorities preempt state laws that use disparate impact theory.
- Ordering the Attorney General and the EEOC to issue guidance to employers.
Employers Takeaways
This executive order represents a shift in federal enforcement policy. Under the order, the EEOC may refrain from initiating new litigation and potentially dismiss pending litigation based on the disparate impact theory. Developments will be forthcoming as federal agencies review pending matters and formulate new employer guidance.
While this executive order will have a significant impact on federal enforcement, it doesn’t change existing federal laws, California’s Fair Employment and Housing Act, or judicial precedent — all of which have adopted disparate impact theory. This means that, despite the executive order, the disparate impact theory or liability is still alive and well, remaining a viable theory of liability under both federal and California laws.
Employers must continue to develop and review their policies with disparate impact in mind, including considering potential disproportionate effects, the legitimate business purposes served by such policies and whether any alternative policies can effectively accomplish the same business purposes. Employers should consult with their legal counsel if they have any questions about the effects of their policies in relation to federal and state anti-discrimination laws. Stay tuned to HRWatchdog for updates on any related EEOC employer guidance.
James W. Ward, J.D., Employment Law Subject Matter Expert/Legal Writer and Editor, CalChamber
CalChamber members can read more about Unequal (Disparate) Impact in the HR Library. Not a member? See how CalChamber can help you.
