There’s been a lot of noise around diversity, equity, and inclusion (DEI) lately, and now, it just got louder. President Trump has signed a new Executive Order (EO) that requires federal agencies to stop using the “disparate impact” theory to investigate discrimination.
If you’re an employer, this changes how the government may (or may not) come after your workplace policies, especially those tied to hiring, promotion, or diversity programs.
Let’s break it down in plain language.
Wait — what is disparate impact?
Disparate impact occurs when a neutral policy (like requiring a certain educational degree or test score) ends up hurting one group — based on race, sex, or another protected trait — more than others. Even if there is no intent to discriminate, the impact matters.
This theory has been federal law for more than 50 years. But Trump’s “Restoring Equality of Opportunity and Meritocracy” EO now requires agencies like the Equal Employment Opportunity Commission (EEOC) to back off, unless Congress specifically instructs them to keep applying the disparate impact theory.
What does the EO actually do?
- It stops federal enforcement of disparate impact unless authorized by Congress.
- It revokes prior guidance that encouraged using statistical outcomes to prove bias.
- It requires contractors to certify they don’t use race- or gender-based preferences.
- It signals a shift from equal outcomes to equal opportunity.
But here’s the key: Title VII hasn’t changed. Individuals can still file disparate impact lawsuits based on federal law in court, once they’ve exhausted their administrative remedies with the EEOC and received a right-to-sue letter. But the federal government will no longer help them.
Why employers should care
You might think this makes things easier for employers. However, it may be more burdensome, especially for multistate employers. Here’s why:
- The EEOC might step back, but states like New York, New Jersey, and California haven’t.
- DEI programs are under a microscope, even well-meaning ones.
- You’re still liable if your practices end up excluding certain groups unfairly.
- Court cases will continue, and legal guidance from the feds is murky at best.
What you should do now:
- Review hiring, promotion, and pay policies. Anything that might disproportionately affect a protected group deserves a second look.
- Update DEI language. Avoid race- or gender-based goals that could be seen as quotas.
- Be state-conscious. Your obligations in New York or New Jersey may go beyond what the feds now require.
- Document merit-based decisions. Keep clear records of why someone was hired, promoted, or let go.
FAQs: What employers are asking
Q1: Can we still be sued for disparate impact?
Yes. Private individuals can still file lawsuits, and many states enforce their own disparate impact laws.
Q2: Are DEI programs illegal now?
No, but programs based on balancing demographics (e.g., quotas or preferences) could be challenged as unconstitutional or discriminatory.
Q3: What if I’m a federal contractor?
You must certify that your business does not use race- or gender-based preferences in hiring. Keep veteran and disability affirmative action plans, but review everything else.
Q4: What about artificial intelligence (AI) hiring tools?
If your AI tools lead to biased results, while federal scrutiny may drop, state laws (like NYC’s AI bias audit law) still apply.
Q5: Should we stop all diversity efforts?
Absolutely not. Just ensure they’re based on fair opportunity, not demographic outcomes.
Need help reviewing your DEI language, hiring practices, or policy updates?
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This blog is for informational purposes only. It is not offered as legal advice, nor is it intended to create an attorney-client relationship with any reader. Consult with competent local employment counsel to determine how the matters addressed here may affect you.
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