Ending disparate impact

For decades now, the law has provided two paths to prove racial discrimination in court. One is through actual evidence of overt discrimination, like a racist comment from a supervisor to a human resources employee. The other method is called “disparate impact”—if a plaintiff can show a pattern that people in a certain racial group are disproportionately disadvantaged, the law presumes that proves intent to discriminate. In April, President Trump issued another groundbreaking executive order aimed to drive a stake through the heart of disparate-impact theory.

The order opens with a ringing vision for American equality: “A bedrock principle of the United States is that all citizens are treated equally under the law. This principle guarantees equality of opportunity, not equal outcomes. It promises that people are treated as individuals, not components of a particular race or group.” Yet this is precisely how disparate-impact theory classifies people: not as individuals, but solely as members of a racial or ethnic category.

The result of decades of disparate-impact law has been to bludgeon employers into certain modes and practices to avoid legal exposure. As the order explains, “On a practical level, disparate-impact liability has hindered businesses from making hiring and other employment decisions based on merit and skill, their needs, or the needs of their customers because of the specter that such a process might lead to disparate outcomes, and thus disparate-impact lawsuits. This has made it difficult, and in some cases impossible, for employers to use bona fide job-oriented evaluations when recruiting.” 

A perfect example arises from the annals of the U.S. Supreme Court. The City of New Haven, Conn., was hiring for senior officers in its fire department. In order to have a neutral, fair promotion process, it used an examination administered by an independent, third-party contractor to ensure the promotions were distributed based on merit rather than the favoritism of the chiefs. One hundred eighteen firefighters took the examinations. Nine of the 27 black candidates passed, while 41 of the 68 white candidates passed. That’s an exam with “disparate impact”—white candidates passed at approximately twice the rate as African American candidates. As a result, the city moved to throw out the examination results entirely for fear of being sued by African American candidates. Instead, the city was sued by white candidates who had worked hard to study for the examinations and wanted a promotion based on the exam results.

Though often seen in employment settings like this, disparate impact theory can be applied in everything from college admissions to housing to credit determinations—anywhere where supposedly neutral criteria when applied could result in different outcomes correlated to race.

The president’s executive order instructs the agencies of the executive branch to rethink rules and regulations that rely on disparate impact, to deprioritize enforcement actions based on disparate impact, and to review any litigation or existing investigations based on disparate impact.

The result should be that employers, especially public employers who use civil service examinations, should have greater flexibility to hire and promote based on merit without fear of lawsuits from rejected candidates. And other businesses, especially in the housing and financial sectors, should proceed with greater peace of mind in their decision-making, especially as courts look at the president’s order and consider its impact on their understanding of each statute.

Just as importantly, this order represents another important nail in the coffin for the Diversity, Equity, and Inclusion ideology that dominates many of our institutions.

The president’s executive order is only that—it is an important first step, but it leaves important work still to be done by Congress and ultimately the courts. Disparate impact is largely a gloss on how courts read various anti-discrimination statutes. The president’s order may prompt courts to start rethinking that presumption. I believe they will find a supportive audience at the highest court, as the U.S. Supreme Court has a solid majority against race-based discrimination. The order quotes from Chief Justice Roberts’ opinion in the Seattle Parents case: “The way to stop discrimination on the basis of race is to stop discriminating on the basis of race.”