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January 14, 2026
In December 2025, the United States Department of Justice issued a final rule eliminating disparate impact liability from its enforcement regulations. But, in response, states are reinforcing the disparate impact theory.
What is disparate impact liability?
Disparate impact liability is a theory of liability for conduct that is not intentionally discriminatory or discriminatory on its face, but which has the effect of discriminating against protected groups.
Why did the Department of Justice eliminate the disparate impact theory of liability and what does the change mean?
President Trump’s Executive Order No. 14281, issued on April 23, 2025, directed federal agencies to “deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability” and to “repeal or amend” Title VI regulations that implement disparate impact liability.
The Department of Justice’s final rule eliminates its authority to pursue cases under Title VI (which prohibits discrimination on the bases of race, color, or national origin in programs or activities that receive federal funding) based on conduct’s discriminatory effect. The final rule also eliminates the affirmative action obligation. Specifically, programs or activities with a history of discrimination used to have to take affirmative action to remedy the effects of past discrimination. The final rule removes that obligation.
The final rule, however, expressly authorizes the use of data on disparate impact to prove intentional discrimination.
The Department of Justice was not the only federal agency to respond to the April 2025 Executive Order. The Equal Employment Opportunity Commission also responded to this Executive Order by directing investigators to close pending charges in employment cases that allege disparate impacts.
The Pendulum Swings the Other Way at the State Level
In direct response to President Trump’s Executive Order, states are reinforcing the disparate impact theory of liability.
New York
New York enacted a law on December 19, 2025, to preserve the disparate impact theory of liability. The law added a disparate impact standard to the State Human Rights Law. See 2025 N.Y. SB 8338. The standard expressly allows an unlawful discriminatory practice to be established by a practice’s discriminatory effect even without discriminatory intent.
New Jersey
On December 15, 2025, the New Jersey Division on Civil Rights issued new rules that codify disparate impact liability under the New Jersey Law Against Discrimination. See New Jersey Administrative Code 13:16. Once a party shows that a policy or practice has a disparate impact on a protected group, the employer must show that the policy or practice is necessary to achieve a “substantial, legitimate, nondiscriminatory interest.”
The rules remind employers that use of artificial intelligence to make employment decisions could result in disparate impacts.
Employer Takeaways
The changes at the federal level do not reduce exposure at the state level. Scrutinize even your most neutral policies, as intent is not necessary to prove liability. Ensure that your policies and practices are job-related and consistent with a legitimate business necessity or, in New Jersey’s terms, are necessary to achieve a substantial, legitimate, nondiscriminatory interest.
The author of this article, Patricia Tsipras, is a member of the Bar of Pennsylvania. This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice in Pennsylvania, New York, New Jersey, or any other jurisdiction, nor does it establish an attorney-client relationship with any reader of the article where one does not exist. Always consult an attorney with specific legal issues.
