What are disparate impact and disparate treatment?
Both "disparate impact" and "disparate treatment" refer to discriminatory practices. Disparate impact is often referred to as unintentional discrimination, whereas disparate treatment is intentional. The terms adverse impact and adverse treatment are sometimes used as an alternative.
Disparate impact occurs when policies, practices, rules or other systems that appear to be neutral result in a disproportionate impact on a protected group. For example, testing all applicants and using test results that will unintentionally eliminate certain minority applicants from protected groups disproportionately in hiring decisions is disparate impact.
In contrast, disparate treatment is intentional employment discrimination. For example, testing a particular skill of only certain minority applicants is disparate treatment.
Federal Anti-Discrimination Laws
Federal laws prohibit job discrimination based on race, color, sex, sexual orientation, gender identity or expression, national origin, religion, age, military status, equal pay, pregnancy, disability or genetic information and prohibits both "disparate treatment" and "disparate impact" discrimination. he primary federal law prohibiting employment discrimination based on race, color, religion, sex, or national origin is Title VII of the Civil Rights Act of 1964. The Equal Employment Opportunity Commission (EEOC) is the main federal agency responsible for enforcing federal laws prohibiting job discrimination.
Executive Order on Eliminating Disparate-Impact Liability
President Donald Trump in April 2025 issued an executive order (EO) directing the EEOC to deprioritize enforcement actions based solely on disparate impact and eliminate the use of disparate-impact liability. The EO also directed the U.S. attorney general and EEOC acting chair to issue guidance for employers on promoting equal access to employment opportunities, specifically by reducing reliance on college degrees. The ripple effects of the EO could influence broader enforcement trends and employer behaviors in the private sector.
Impact on Employers and HR
The EO cannot change the text of Title VII, nor does it immediately change Title VII’s application to private employers. Individuals can still pursue disparate-impact claims through litigation. Employers should not abandon compliance efforts and should continue to ensure that all employment tests and selection criteria are job-related and consistent with business necessity. AI algorithms, screening, and automated decision-making tools used in recruitment and promotion processes must be regularly reviewed for potential bias or unintended exclusionary effects.
Additionally, many state and local laws continue to focus on the disparate impact of artificial intelligence— especially systems used to screen candidates, rank resumes, or assess qualifications, potentially creating a complex compliance landscape. However, reduced federal oversight does not eliminate legal, reputational, or operational risks, and employers must therefore remain diligent.
Not sure if your state has laws governing the use of AI for employment purposes?
Recommended Employer Actions
- Review hiring and promotion criteria regularly for alignment with business necessity, including regular audits of AI or automated decision-making tools
- Implement holistic evaluation frameworks that consider skills, experience, and competencies over rigid degree requirements.
- Develop or expand skills-based hiring, apprenticeships, upskilling initiatives, and other inclusive pathways.
- Avoid knee-jerk elimination of assessments with potential disparate impact. Instead, analyze them and adjust as needed.
- Conduct due diligence now to avoid reactive compliance issues later.
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