End Disparate Impact Liability in Hiring

Author: Preston Brashers, Research Fellow

Affordability 101 · Chapter 3: Freedom to Work and Enterprise

Plymouth Institute for Free Enterprise

Topline

Policymakers should dismantle “disparate impact” laws and rules, which can require employers to justify employment practices like aptitude tests if they have different outcomes by race, sex, or other protected class.

Background

Title VII of the 1964 Civil Rights Act prohibited employment practices that amount to discriminatory treatment based on race, color, religion, sex, or national origin. A 1991 law added the potential for claims based on disparate impact. Since then, court interpretations, regulations and guidelines from the Equal Employment Opportunity Commission (EEOC) have left employers vulnerable to discrimination claims for business practices with no underlying discriminatory intent. “Disparate impact” liability has discouraged employers from using tests of general aptitude, instead relying on college outcomes to screen job candidates to limit risk of EEOC claims. President Trump has directed agencies to deprioritize disparate impact enforcement and prioritized a meritocracy focus at the EEOC. On June 9, 2026, the Justice Department’s Office of Legal Counsel opined that the EEOC’s interpretation of the disparate impact doctrine violates the 14th Amendment’s Equal Protection Clause by pressuring employers to engage in race-based decision-making. Simultaneously, the EEOC has been shifting enforcement priorities away from disparate impact claims.

Action Items (Congress and the Executive Branch)

• The executive branch should continue to challenge disparate impact doctrine.
• Congress should repeal disparate impact liability under Title VII (42 U.S.C. § 2000e-2(k)) or clarify that employers cannot be held liable for practices that aren’t intended to discriminate based on protected class.
• Congress should codify safe harbor rules that allow employers to administer general or relevant aptitude tests without risk of employment law liability.

How It Would Make Life More Affordable

• Letting employers set their own hiring practices would improve matching of workers to jobs where they can be most productive and command a high wage.
• Reducing risk of legal, reputational, or financial damages for making “wrong” hiring decisions would cut HR overhead and make firms more willing to hire.
• Letting employers distinguish between job candidates’ qualifications via testing would reduce employers’ reliance on expensive degrees as a deciding factor.
  • This would reduce artificially inflated demand for degrees and alleviate upward pressure on college tuition and student loans.

Related Legislation or Proposals: Restoring Equal Opportunity Act (S. 2343, H.R. 4448).

Bottomline

Disparate impact rules can increase disparities in labor outcomes between those with and without degrees, hurting many of the people they are intended to help.

This memo is part of Affordability 101, Advancing American Freedom’s playbook of 101 policy solutions to make life more affordable.

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