President Trump Signs an Executive Order Aiming to Eliminate Disparate Impact Liability
On April 23, 2025, President Donald Trump signed Executive Order 14281, titled “Restoring Equality of Opportunity and Meritocracy,” which directed federal agencies to cease enforcement of civil rights laws that prohibit "disparate impact" discrimination. Consistent with this administration’s initiative to roll back diversity, equity and inclusion (DEI) programs, this Executive Order (EO) revokes presidential approvals of certain federal regulations that previously allowed federal agencies to enforce anti-discrimination provisions based on disparate impact.
Disparate impact refers to employment practices that, while neutral on their face, disproportionately affect members of a protected class under civil rights laws. Unlike disparate treatment, which involves intentional discrimination, disparate impact focuses on the consequences of policies or practices, regardless of intent. This legal theory was established in the 1971 United States Supreme Court case Griggs v. Duke Power Co., which held that employment practices must be related to job performance and not disproportionately exclude certain groups unless justified by business necessity.
Disparate impact claims are recognized under several federal statutes, including: (i) Titles VI and VII of the Civil Rights Act of 1964, (ii) Fair Housing Act; and (iii) Americans with Disabilities Act (ADA). Under these laws, a plaintiff must demonstrate that a specific employment practice causes a significant adverse impact on a protected group. The burden then shifts to the employer to show that the practice is job-related and consistent with business necessity. If the employer meets this burden, the plaintiff can still prevail by showing that an alternative practice with less discriminatory effect exists and the employer refuses to adopt it.
Under President Trump’s new Executive Order, federal agencies such as the Equal Employment Opportunity Commission, Department of Justice and the Department of Housing and Urban Development, have been instructed to assess all pending lawsuits, investigations and consent judgments that rely on a disparate-impact theory of liability and take appropriate action. The order also includes provisions related to promoting skills-based hiring and reducing reliance on college education as a hiring factor.
While the executive order directs federal agencies to deprioritize enforcement of disparate impact claims, it does not alter existing statutes. Disparate impact remains a recognized theory of liability under Title VII of the Civil Rights Act of 1964 and other federal laws. Therefore, private litigation based on disparate impact may continue, and state and local laws may still recognize and enforce disparate impact claims. Employers should continue to monitor their policies and practices for potential disparate impact and consult with legal counsel for guidance.
Speaking of DEI . . . Nationwide Litigation on the Enforcement and Legality of DEI Programs Continues to Dominate News Headlines and Court Dockets
1. DEI Certification
The Diversity, Equity, and Inclusion Certification refers to a requirement established under Executive Order 14173, signed by President Trump in January 2025. Federal contractors and grant recipients are required to certify they do not operate DEI programs that violate federal anti-discrimination laws. The certification is enforceable under the False Claims Act (FCA), introducing potential legal risks for entities found non-compliant.
The DEI Certification requirement has been subject to multiple legal challenges:
- Nationwide Injunction: On Feb. 21, 2025, the U.S. District Court for the District of Maryland issued a nationwide preliminary injunction against enforcing the DEI certification and related provisions of EO 14173. The court found these provisions likely violated the First Amendment by imposing content-based restrictions on speech and were unconstitutionally vague under the Fifth Amendment.
- Appeals Court Stay: On March 14, 2025, the 4th Circuit Court of Appeals stayed the District Court’s injunction, allowing the government to resume enforcement of the DEI certification requirement while the appeal is pending. The Appellate Court determined that the government demonstrated a likelihood of success on the merits of its appeal.
- District Court Ruling in Illinois: Separately, on April 15, 2025, a federal judge in Illinois issued a preliminary injunction preventing the Department of Labor from enforcing the DEI certification requirement against Chicago Women in Trades, a nonprofit organization. The court found the certification’s vague language likely infringed upon First Amendment rights and could unlawfully pressure organizations to alter their DEI programs.
2. Despite Ongoing Litigation, the DEI-Related Executive Orders Remain Valid and Effective
Adding yet another court to the DEI Certification quandary, on May 2, 2025, a federal court in the District of Columbia rejected a request for a Preliminary Injunction in National Urban League et al. v. Trump, et al., 25-471. The court denied the Plaintiffs’ request to halt the enforcement of the following DEI-related Executive Orders for the pendency of their respective legal challenges:
- Executive Order 14151: “Ending Radical and Wasteful Government DEI Programs and Preferencing”—terminates all federal DEIA (Diversity, Equity, Inclusion and Accessibility) programs, positions, grants and contracts.
- Executive Order 14168: “Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government”—eliminates federal recognition of transgender identities and bars agencies from funding “gender ideology.”
- Executive Order 14173: “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”—bans federal contractors and grantees from using DEIA programs and imposes penalties for noncompliance.
The D.C. District Court upheld the DEI certification provision in EO 14173—a departure from its sister courts’ prior rulings.
The court found the Plaintiffs’ concerns about the government adopting an overly broad definition of “illegal discrimination” to be speculative, emphasizing that this issue relates to the interpretation of existing antidiscrimination law, not to the DEI certification requirement itself. It also ruled that the DEI certification provision does not chill protected speech because it targets only those DEI initiatives that violate federal antidiscrimination laws—not all DEI efforts—noting there is no First Amendment right to run illegal programs. The District Court’s finding further disagreed with the Northern District of Illinois’ finding in Chicago Women in Trades v. Trump, which criticized the EO for not defining what DEI programs might violate federal law. The court found it sufficient that the standard is based on existing anti-discrimination statutes and refused to require hypothetical examples.
As for the Plaintiffs’ arguments about liability under the False Claims Act (FCA), the court found that concerns of liability for minor or technical errors are largely unfounded. Liability under the FCA requires a contractor to act with knowledge, deliberate ignorance or reckless disregard, and good-faith mistakes do not meet that threshold. The judge expressed skepticism that courts would interpret the DEI certification as admitting “materiality” sufficient for FCA enforcement unless the government can prove knowing and intentional misconduct.
3. Where Does This Leave Things?
The legal landscape surrounding DEI and DEI Certifications remains dynamic. Despite the confusing and inconsistent decisions from the judiciary, courts are consistent in their rulings that not all programs and efforts to promote diversity are per se illegal.
Currently, only the Department of Labor is enjoined from requiring federal contractors and grantees to sign the DEI Certification. And signing the DEI Certification does not require a cart blanche termination of all DEI activities—just those that are already illegal under current antidiscrimination law. Finally, liability under the FCA may also be avoided so long as contractors and grantees both act in good faith and have a good faith belief that the DEI programs and activities are in compliance with current antidiscrimination laws and policies.
Clear as mud? If you haven’t already, now might be a good time to confer with legal counsel for a privileged analysis of your DEI programs and efforts as well as compliance with the DEI Certification.
