New Executive Order Changes Course on Certain Employment Discrimination Claims
The president’s April 23 executive order marks a significant shift in the executive branch’s approach to employment discrimination law. It specifically targets the concept of disparate impact liability. While the order doesn’t repeal current law or court precedent, it could change how DOJ or other agency lawyers approach these employee claims and the evidence needed to prove them.
Understanding Disparate Impact Liability
Traditional discrimination claims often involve disparate treatment. These require proof that an employee faced intentional discrimination due to protected characteristics such as race, national origin and gender. In contrast, a disparate impact claim requires an employee to prove that a facially neutral policy or practice disproportionately and adversely affects a protected class.
The Supreme Court first recognized the framework for disparate impact liability as a viable theory of discrimination in 1971 with Griggs v. Duke Power Company. The Court examined an employer’s requirement that an employee must either have a high school education or pass both an aptitude test and IQ test to qualify for a position in higher paying departments. The Court found that white employees were approximately 10 times more likely to meet these requirements. It held that the use of such tests that disproportionately excluded individuals in a protected group were unlawful unless the employer could show that passing these tests constituted a business necessity.
Congress codified disparate impact liability into law in 1991 by amending Title VII of the Civil Rights Act to include Section 703(k). This provides workers with the burden of proof to show that a particular employment practice has a disparate impact. The employer must then demonstrate that the practice is “job related for the position in question and consistent with business necessity.”
The Supreme Court, in Smith v. City of Jackson, also found that the Age Discrimination in Employment Act recognizes disparate impact liability. And the EEOC has current regulations on disparate impact under Title VII and the ADEA.
What Does the Latest Executive Order Change?
The executive order and its fact sheet maintain an alternative position. They claim that disparate impact liability “undermines our national values” and “violates the Constitution’s guarantee of equal treatment for all by requiring race-oriented policies and practices to rebalance outcomes along racial lines.” The order states that “it is the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible.”
To implement this position, the order:
- Revokes prior presidential actions that approved of disparate impact liability.
- Directs agencies to deprioritize enforcement of the statutes and regulations that include disparate impact liability.
- Directs the Equal Employment Opportunity Commission (EEOC) and Attorney General to assess all pending investigations, lawsuits, injunctions and consent judgments that rely on disparate impact and take appropriate action consistent with the new policy. The order also directs other agencies, including the Department of Housing and Urban Development and the Consumer Financial Protection Bureau, to review pending proceedings under the Fair Housing Act, Equal Credit Opportunity Act, and related statutes that are premised on disparate impact.
- Instructs the Attorney General to repeal or amend Title VII regulations for all agencies to the extent they recognize disparate impact liability, determine whether any federal authorities preempt state laws imposing disparate impact liability, and address any constitutional infirmities.
- Tasks the Attorney General and the EEOC chair to issue guidance to employers on promoting equal access to employment.
What Does This Mean for Employers?
Questions remain on the order’s immediate effects, but some changes may be on the horizon. The acting EEOC chair and the Attorney General are unlikely to bring new litigation based on disparate impact theory. Both have made clear their views opposing disparate impact liability. The pursuit of disparate impact investigations is unlikely to be a priority for either the EEOC or the DOJ. While the order may dampen activity by the EEOC and the Attorney General in this regard, private individuals are less affected.
Importantly, the order does not (nor could it) alter or repeal Section 703(k) of Title VII of the Civil Rights Act. Such changes must happen through the legislative process. The order also cannot change current Supreme Court precedent or agency regulations that were issued through notice and comment under the Administrative Procedure Act. Employees may continue to obtain right-to-sue letters from the EEOC and bring disparate impact claims against employers based on existing statutes, regulations and decades of court precedent.
The full nature of the order’s impact is yet to be seen, particularly as state and local anti-discrimination laws are potentially up for debate. Phelps will continue to monitor these developments and provide further guidance as it becomes available.
Contact Cannon Funderburk or any member of the Phelps labor and employment team with questions.
