Quick Hits
- On September 29, 2026, the SBA removed disparate impact liability and race-conscious affirmative action requirements from 13 CFR Part 112, effective immediately, without prior notice and comment.
- The revised rule states Title VI of the Civil Rights Act of 1964 prohibits only intentional discrimination and rests on the same legal authorities as the earlier agency rescissions, Alexander v. Sandoval, Loper Bright, Students for Fair Admissions, and Executive Order 14281.
- The SBA rule preserved the government’s and litigants’ ability to use disparate outcome data to prove intentional discrimination, reinforcing that data collection and preservation obligations remain squarely in place for employers even as the federal enforcement posture changes.
The SBA’s rule change follows the same template that the U.S. Departments of Justice, Interior, Transportation, Agriculture, and Labor used over the preceding ten months, but it also removes affirmative action provisions that the other rescissions did not need to reach.
The SBA Rule
The SBA amended 13 CFR Part 112, its Title VI implementing regulation for federally assisted programs, in three respects. It removed the affirmative action provisions at Sections 112.3(b)(3) and 112.7(d), which authorized, and in some cases required, measures conscious of race, color, and national origin to overcome the consequences of practices that had limited participation, even where the recipient had never used discriminatory policies. It deleted the disparate impact language in Section 112.4 that extended the employment-discrimination prohibition to practices that merely “tend” to have a discriminatory effect, and removed the companion illustration at Section 112.7(a).
Same Pattern, One Additional Layer
The SBA rule follows the pattern in other federal agencies’ actions to rescind disparate impact regulations under Title VI. Indeed, the rule notes that DOJ reviewed and approved it. The SBA relies on the same reasoning as the other agencies: Title VI’s “single, best meaning” is that it prohibits intentional discrimination only. The SBA describes its disparate impact regulations as in “considerable tension” with Title VI and the Supreme Court of the United States’ precedents (including Students for Fair Admissions, Inc. v. President & Fellows of Harvard College). The SBA also invokes Executive Order 14281, which directs the elimination of disparate impact liability “to the maximum degree possible.” SBA issued its regulation without notice and comment and with an immediate effective date, invoking the Administrative Procedure Act’s exception at 5 U.S.C. § 553(a)(2) for rules relating to public property, loans, grants, benefits, or contracts.
The SBA rule goes further than the other rescissions by also addressing affirmative action. Prior sections of its rules authorized and sometimes required funding recipients to use race-conscious measures, such as racial preferences, special consideration of race, and affirmative steps to achieve racial balance, without requiring the narrow tailoring to a compelling governmental interest that strict scrutiny demands. The SBA characterized these provisions as encouraging “the exact conduct the Equal Protection Clause forbids.” The rescission of those provisions is a separate action from the disparate impact removal, and SBA took the position that each amendment operates independently, meaning that invalidation of one would not affect the others.
Disparate Impact Is Out, but the Same Data Can Still Support Liability
Consistent with every prior Title VI disparate impact rescission (by the U.S. Departments of Justice, Interior, Transportation, Agriculture, and Labor (DOL)), SBA stated that eliminating disparate impact liability “does not preclude the use of data on disparate outcomes to help prove intentional discrimination.” It drew the same distinction the DOL rule drew most clearly: using statistical disparity to help establish liability for intentional discrimination as an evidentiary matter “materially differs from using such disparity to impose liability for an unintentional disparate impact.”
That language is now in six federal agency rescission rules. The federal government has not told funding recipients or employers that their data is safe to disregard. It has told them that the same statistics once used to establish disparate impact liability are now positioned as evidence of intentional discrimination, the theory that remains fully enforceable.
SBA’s own cost-benefit analysis acknowledged that the removed provisions were already “effectively inoperative,” which only sharpens the point. The practical change for funding recipients may be modest, but the evidentiary reframing of disparate outcome data, from a standalone basis for liability to a tool for proving intent, is not.
What This Means for Employers and Funding Recipients
The SBA rule narrows part 112 regulations under Title VI. It does not affect Title VII, which independently codifies disparate impact liability, or the state and local statutes that continue to apply it. Employers with SBA relationships may wish to consider:
- Identifying the SBA relationship at issue, i.e., determining whether the organization is applying for or receiving SBA financial assistance covered by part 112, participating in an SBA contracting program, or both.
- Continuing to evaluate intentional and disparate impact discrimination risk by, for example, conducting and structuring adverse impact analyses under attorney-client privilege before a problem surfaces, not after.
- Accounting for continued private and state-level exposure. Private plaintiffs retain a right of action under Title VII of the Civil Rights Act of 1964, and state and local agencies continue to apply disparate impact analysis under their own statutes.
- Recognizing what the data now proves. The demographic and selection data that employers collect and maintain does not become safe because disparate impact liability is rescinded. That same data is now positioned as potential proof of intentional discrimination, the theory the U.S. Equal Employment Opportunity Commission (EEOC) says it is prioritizing.
Ogletree Deakins’ Diversity, Equity, and Inclusion Compliance Practice Group, Government Contracting and Compliance Practice Group, and Workforce Analytics and Compliance Practice Group will continue to monitor developments and will provide updates on the Diversity, Equity, and Inclusion Compliance, Employment Law, Government Contracting and Compliance, and Workforce Analytics and Compliance blogs as additional information becomes available.
This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.
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