Executive Order Targets Disparate Impact Claims: Key Takeaways for Employers

On April 23, 2025, President Donald Trump signed an Executive Order titled Restoring Equality of Opportunity and Meritocracy (the Order). The Order calls for a government-wide rollback of disparate impact liability, a longstanding theory under which employers may be liable for facially neutral policies that result in disproportionate outcomes across protected classes, even in the absence of discriminatory intent.

The Order has direct implications for employers, particularly with respect to federal enforcement under Title VII of the Civil Rights Act, which governs workplace discrimination. While the Order does not amend Title VII or other federal statues, it represents a substantial shift in federal enforcement priorities and agency discretion. 

What is disparate impact liability?

Disparate impact is a legal theory first recognized by the U.S. Supreme Court in Griggs v. Duke Power Co., 401 U.S. 424 (1971). It allows for employees or applicants to challenge facially neutral employment practices if those practices have a statistically significant negative impact on members of a protected class (e.g., race, sex, national origin) and are not justified by business necessity.

Unlike disparate treatment (which involves intentional discrimination), disparate impact does not require proof of intent. An employer defending a disparate impact claim must show that the challenged practice is job-related and consistent with business necessity. Even then, liability may still attach if a less discriminatory alternative exists but was not adopted. This theory has historically been applied by the Equal Employment Opportunity Commission (EEOC) and Department of Justice (DOJ) in enforcing civil rights laws in the employment sector.

Key provisions of the Order

The Order asserts that disparate impact liability encourages race- and sex-conscious decision-making, undermines merit-based employment practices and conflicts with constitutional principles of equal protection. It directs sweeping federal agency action, including:

• Deprioritization of enforcement: All federal agencies are instructed to scale back enforcement of laws and regulations that include disparate impact liability, including those under Title VII.
• Case and investigation review: The DOJ and EEOC are ordered to review all pending investigations, civil suits and positions involving disparate impact theories and take “appropriate action” in line with the Order’s policy.
• Regulatory rollback: The Attorney General must initiate the repeal or amendment of Title VI regulations that currently allow for disparate impact analysis in federally funded programs.
• Review of consent decrees: Agencies are required to evaluate existing settlements and consent judgments that rest on disparate impact liability and consider revising or terminating them.
• Guidance for employers: The EEOC and DOJ are instructed to issue updated technical assistance for employers, including guidance on increasing access to employment without reliance on formal educational credentials.
• State law preemption review: Federal agencies will examine whether any state laws imposing disparate impact liability should be challenged or preempted.

What this means for employers

While the Order cannot alter the text of Title VII and cannot overturn U.S. Supreme Court precedent, it alters how federal agencies will enforce Title VII. Given this, employers should assess the following key takeaways:

1. The Order deprioritizes federal investigations based on disparate impact, but private plaintiffs may still bring such claims, and courts are not bound by agency enforcement policies. The U.S. Supreme Court has not overturned Griggs, and current precedent still permits disparate impact claims.
2. Numerous state and municipal laws continue to permit disparate impact theories and may be unaffected by the federal shift. Employers must continue to comply with these broader obligations.
3. Policies that result in statistical disparities (e.g., degree requirements, selection tests or uniform criteria) should still be reviewed periodically. Neutral intent is not always a defense in jurisdictions that maintain broader anti-discrimination frameworks.
4. This Order does not prohibit DEI initiatives or data tracking, but legal teams should ensure such programs are not framed in ways that suggest quotas, preferences or race-based selection criteria. Employers may also want to revisit degree or credential requirements.
5. If your organization is currently facing an EEOC investigation or DOJ inquiry based on disparate impact, this Order may lead to revised enforcement posture or settlement negotiation strategy.

Next steps

The Order marks a clear pivot in federal employment law enforcement, shifting away from statistical analysis and toward intent-based scrutiny. Its practical effect will depend on agency follow-through, future litigation and potential legislative response. While the federal government may narrow its use of disparate impact enforcement, courts and state regulators are not bound by the Order.

We are actively monitoring agency actions, legal challenges and related developments. If you have questions about how the Order may affect your compliance obligations, litigation strategy or hiring policies, our Dinsmore Labor & Employment team is available to assist.