Has Trump’s EO killed disparate impact claims?: Employment & Labor Insider

On Wednesday, President Donald Trump issued a new executive order, “Restoring Equality of Opportunity and Meritocracy.” The buzz is that the President has wiped out disparate impact liability.

But has he? I don’t think so. The EO will have a definite — dare I say it? — impact, but that theory of liability is not dead.

ABCs of disparate impact

In 1991, Congress amended Title VII to include specific provisions related to “disparate impact” claims (scroll down to subsection (k)). Disparate impact exists when an employer has a facially neutral practice or requirement that disproportionately affects individuals in a protected group. This applies regardless of whether the employer had any intent to discriminate. 

But, assuming the employer had no intent to discriminate, it has a defense if it can show that the practice or requirement is job-related and consistent with business necessity.

Unless the plaintiff can show that a reasonable alternative to the practice or requirement exists that would not result in the disparate impact and that the employer refused to adopt the alternative practice.

You got that? It’s pretty complicated.

Can you give us an example?

Yes, I can! Glad you asked!

Ambulance Chasers, LLC, a personal injury law firm, will not hire anyone as an attorney who doesn’t have an engineering degree. Let’s assume women are less likely than men to have engineering degrees. Female applicants without engineering degrees might sue the law firm, claiming that the engineering degree requirement has a disparate impact on female applicants. AC is not likely to be able to show that the engineering degree requirement was job-related and consistent with business necessity since AC is a personal injury firm. Because the unnecessary degree requirement resulted in the disproportionate exclusion of female applicants, it would probably be found to be unlawful. Even if AC never intended to discriminate against women.

On the other hand, AC’s rival law firm across the street, Upstanding and Right, LLP, will not hire anyone as an attorney who doesn’t have a law degree, and their office is in a state that does not allow people to “read for the law,” ala Abe Lincoln. And let’s assume that women are less likely than men to have law degrees. (I do not believe that is true in real life, but this is a hypothetical.) So women are disproportionately excluded from being hired as attorneys because they are less likely than men to have the requisite law degree. If the women sue for disparate impact discrimination, they will probably lose because a law degree requirement for attorneys is job-related and consistent with business necessity. And no reasonable alternative to the law degree requirement exists.

A real case from the old days

Disparate impact discrimination was addressed by the U.S. Supreme Court in 1971, in the case of Griggs v. Duke Power. In that case, Duke Power required job candidates for various production-level positions to have a high school diploma or to pass an intelligence test before they would be considered for hire or transfer. These requirements were not “shown to be significantly related to successful job performance,” and they resulted in the disproportionate exclusion of Black candidates.

According to the Court, “[Title VII] proscribes not only overt discrimination, but also practices that are fair in form, but discriminatory in operation. The touchstone is business necessity. If an employment practice which operates to exclude [Blacks] cannot be shown to be related to job performance, the practice is prohibited.” (Emphasis is mine.)

The decision concluded,

Nothing in [Title VII] precludes the use of testing or measuring procedures; obviously they are useful. What Congress has forbidden is giving these devices and mechanisms controlling force unless they are demonstrably a reasonable measure of job performance. Congress has not commanded that the less qualified be preferred over the better qualified simply because of minority origins. Far from disparaging job qualifications as such, Congress has made such qualifications the controlling factor, so that race, religion, nationality, and sex become irrelevant. What Congress has commanded is that any tests used must measure the person for the job, and not the person in the abstract.”

(Emphasis is mine.)

Again, Congress amended Title VII in 1991 to specifically address this.

Now, back to President Trump and his Executive Order.

Trump’s EO

The Executive Order omits the “business necessity” defense to a disparate impact claim. It says, in so many words, that disparate impact liability exists when a practice has a discriminatory effect, even when the employer has no intent to discriminate. Period. 

I saw many blog and social media posts last night that also omitted the “business necessity” defense to disparate impact liability.

That key omission aside, a President cannot override an act of Congress by Executive Order. But I think President Trump knew that and is not trying to do that. Instead, he is effectively directing the federal government (the Equal Employment Opportunity Commission and the Department of Justice) to “stand down” on disparate impact cases.

The EO says,

Sec. 4.  Enforcement Discretion to Ensure Lawful Governance.  Given the limited enforcement resources of executive departments and agencies (agencies), the unlawfulness of disparate-impact liability, and the policy of this order, all agencies shall deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability . . ..” 

(Emphasis is mine.)

The EO also directs the Chair of the EEOC and the Attorney General to review all pending disparate impact cases and “take appropriate action.” The feds are also directed to determine where federal law preempts state law (it probably doesn’t) and act accordingly in litigation under state law. Finally, the EO instructs federal agencies to revoke various regulations related to disparate impact liability.

In my opinion, the President’s strategy of “deprioritizing” disparate impact claims at the federal level — as opposed to trying to nullify this part of Title VII — might survive the inevitable court challenge, and might result in a decrease in disparate impact litigation.

But, barring Congressional action, disparate impact would still violate Title VII, and I would expect the plaintiff’s bar to take up the slack in enforcement by federal agencies. In other words, if you’ll pardon my mixed metaphor, take the buzz with a grain of salt.