Executive Order Targets Disparate-Impact Liability

On April 23, 2025, President Trump issued Executive Order (EO) 14281 titled “Restoring Equality of Opportunity and Meritocracy.” The EO establishes the current administration’s policy broadly opposing the use of disparate-impact liability.

The EO frames disparate impact as unconstitutional and suggests it “threatens the commitment to merit and equality of opportunity that forms the foundation of the American Dream.” The order instructs all federal agencies to eliminate or reduce enforcement actions based on disparate impact across employment, housing, lending, and education.

Immediate Response

Key agencies are directed to reassess their regulations, enforcement priorities, and pending actions that rely on disparate-impact theories. While the EO does not amend statutory law or override court decisions, it aims to reshape federal regulatory posture, and future agency interpretations of laws such as Title VII of the Civil Rights Act of 1964, Title VI of the Education Amendments of 1972, the Fair Housing Act, and the Equal Credit Opportunity Act.

Employers should monitor new guidance from the Equal Employment Opportunity Community (EEOC) and Department of Justice (DOJ) and reassess how they evaluate hiring and promotion practices amid this evolving legal landscape.

Disparate Impact Discrimination Claims

Disparate-impact liability is a long-standing doctrine first recognized, unanimously, in the 1971 case Griggs v. Duke Power Company. It allows claims of discrimination to move forward based on the unequal effects of facially neutral policies. Liability arises if the employer fails to show the policy is job-related and consistent with business necessity.

The opening lines of the new EO state, “[a] bedrock principle of the United States is that all citizens are treated equally under the law. This principle guarantees equality of opportunity, not equal outcomes. It promises that people are treated as individuals, not components of a particular race or group.” While these statements specifically emphasize race, disparate impact has been used to challenge employment policies that disproportionately affect women, older workers, individuals with disabilities, and other protected groups, even in the absence of discriminatory intent.

Recent examples of individuals who challenged employment policies for having disparate impact include:

• Women who were disproportionately screened out of police or fire department positions due to overly rigid physical testing not demonstrably related to job performance
• Older workers who were disadvantaged by hiring algorithms or minimum experience thresholds that favor younger candidates

• Individuals with disabilities who were excluded by blanket policies that didn’t account for reasonable accommodations
• Non-native English speakers who were impacted by English-only policies with no business necessity.

The EO asserts employers face “a near insurmountable presumption of unlawful discrimination” when a practice creates a disparate impact on a particular group. However, the reality is employers have generally been very successful in establishing job relatedness (and avoiding liability) in most cases.

What to Expect Next

This EO sets in motion a series of federal agency reviews and policy shifts that are likely to unfold in the coming months. Employers should expect the following developments:

Federal Regulatory Rollback

The U.S. Attorney General, in coordination with agency heads, has been directed to review and propose amendments or repeals to current civil rights regulations, especially those rooted in Title VI of the Civil Rights Act of 1964. The EO specifically targets longstanding regulatory language authorizing disparate-impact enforcement, which may be stripped or reinterpreted through updated rulemaking. The EO requires a report to the President within 30 days or by May 23, 2025.

Pending Disparate-Impact Claims

Agencies like the EEEOC, Housing and Urban Development (HUD), and the Consumer Financial Protection Bureau (CFPB) are instructed to assess all active cases that rely on disparate-impact theories and take “appropriate action” consistent with the new policy by potentially pausing, narrowing, or even abandoning those efforts. The EO requires action on pending claims within 45 days, or by June 7, 2025, and action regarding existing consent judgments and permanent injunctions within 90 days, or by July 22, 2025.

Impact on State Law

The EO directs the Attorney General to assess whether state-level disparate-impact frameworks are preempted by federal law or constitutionally sound. Although this could trigger future litigation or federal preemption arguments, this EO does not (and cannot) unilaterally override state law. Many states maintain their own independent civil rights statutes with disparate-impact protections that remain enforceable.

New Federal Guidance

The EO tasks the Attorney General and EEOC with developing new resources to help employers focus on “equal access” without triggering disparate-impact liability concerns. This may include guidance on using non-degree credentials or other “merit-based” hiring tools.

Legal Challenges

Civil rights organizations and possibly some states are likely to challenge the EO in court, arguing it exceeds executive authority, undermines Congressional mandates, or weakens civil rights enforcement in violation of statutory protections. These legal challenges may delay implementation or shape the practical scope of the EO’s effects.

The Bottom Line

While the EO instructs federal agencies to deprioritize enforcement of disparate-impact-related claims, it does not remove the underlying statutory protections provided by civil rights laws. Even if agencies such as the EEOC reject disparate impact theory, private plaintiffs will still be able to assert such claims until there are statutory changes and/or new court decisions.

Therefore, businesses should remain cautious to ensure their hiring, promotion, and other employment practices do not disproportionately exclude individuals based on characteristics like sex, age, disability, race, and other protected characteristics under Title VII, the Virginia Human Rights Act, and other applicable state and federal law.

Our team is closely monitoring developments related to the Trump Administration’s Executive Orders and the potential impact on federal, state, and local compliance obligations. Please contact the authors of this article, your Woods Rogers attorney, or a member of the Labor & Employment team if you have concerns.