Quick Hits
- The attorneys general of California, Delaware, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, New York, Oregon, Vermont, and Washington issued joint guidance explaining why the disparate impact theory of liability remains legal and enforceable under various laws. The guidance rejects the federal government’s characterization of disparate impact theory and enforcement as “illegal.”
- Even though the federal government has effectively terminated disparate impact enforcement, the need to monitor and evaluate workforce decisions for both intentional discrimination and disparate impact remain.
- The federal government and these fourteen states will scrutinize the same employment decisions, and the data behind them, under different theories.
- The states’ guidance includes a sector-by-sector roadmap of proactive measures covering employment, as well as housing, lending, and other sectors that signal what these attorneys general will look for in enforcement actions.
What the States’ Guidance Says
The guidance—issued by the AGs of California, Delaware, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, New York, Oregon, Vermont, and Washington—does not claim to be and is not new authority. Rather, the core legal argument underlying disparate impact theory is already familiar. Title VII of the Civil Rights Act of 1964 recognizes two forms of unlawful discrimination: intentional discrimination and disparate impact. The disparate impact theory of liability traces to Griggs v. Duke Power Co., where the Supreme Court of the United States held that facially neutral employment practices that exclude a protected group are unlawful if the employer cannot show they are job-related. That framework is statutory. It has not been repealed.
While the guidance acknowledges that some more recent Supreme Court decisions, including Alexander v. Sandoval, have narrowed who can enforce disparate impact protections and in what forum, the states argue those decisions “do not disturb the legality of disparate impact liability itself.”
The Federal Government’s Position
The federal government’s position rests on its own authorities. Executive Order (EO) 14281, “Restoring Equality of Opportunity and Meritocracy,” directs federal agencies to stop enforcing disparate impact liability theories in civil rights enforcement and repeal disparate impact rules and regulations where possible. The U.S. Departments of Justice (DOJ), Interior, Transportation, Agriculture, and Labor all rescinded the disparate impact provisions of their Title VI of the Civil Rights Act of 1964 regulations. These rules governed, among other things, how federal grant recipients, including many employers, addressed facially neutral practices with discriminatory effects. Each agency relied on the same legal basis: Alexander v. Sandoval, the Supreme Court’s decisions in Loper Bright Enterprises v. Raimondo and Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, and EO 14281.
The DOJ’s Office of Legal Counsel (OLC) went even further. On June 9, 2026, the OLC issued a memorandum opinion concluding that the EEOC’s disparate impact guidelines are inconsistent with Title VII and constitutionally suspect. The OLC’s argument: the guidelines impose liability based on effects alone without regard to employer intent and pressure employers toward race-based decision-making. The opinion is an executive branch legal position, not a statute or judicial decision, and it does not change the text of Title VII. However, the constitutional arguments will be tested in court.
The states’ guidance rejects this framing. The states argue in the guidance that the president cannot rewrite statutes the U.S. Congress enacted or use executive orders to override protections in the U.S. Constitution or state law. The states further argue the federal government has created confusion about what the law requires. The federal government says it is restoring the original meaning of civil rights law. Both positions are in play.
Employer Takeaways
The states’ guidance does not impose new legal obligations on employers. However, the guidance indicates that those fourteen states are formally committed to continuing to enforce disparate impact protections regardless of pullback by the federal government. That has practical consequences on three fronts.
Employment decisions, and the data behind them, face scrutiny from both directions.
The federal agencies that rescinded their regulations under Title VI of the Civil Rights Act of 1964 kept data-retention expectations in place and stated the data can still prove intentional discrimination. The guidance confirms that these fourteen states will evaluate the same decisions and data for disparate impact. The federal government looks at whether the decision reflects intent. These states look at whether the decision produces unjustified effects. Even though the federal government is moving away from disparate impact enforcement, the obligation to monitor and evaluate workforce decisions under both theories remains. Employers may wish to structure that analysis under attorney-client privilege from the outset, so legal risk can be assessed under attorney-client privilege.
State enforcement is already underway.
The guidance cites recent actions against algorithmic bias in lending and tenant screening, housing ordinances that disproportionately affect domestic violence survivors, and language access barriers. Employers that use artificial intelligence (AI) or algorithmic tools in hiring, screening, or lending, take note: the guidance points to recent court decisions allowing disparate impact claims against algorithmic screening and hiring tools to proceed, and to state AG settlements targeting AI-related practices. The guidance also includes a sector-by-sector roadmap covering employment, housing, lending, language access, disaster preparedness, siting, and education. For employers, the guidance highlights their potential need to standardize selection criteria around job-relevant qualifications, provide equal access to professional development and mentorship, and maintain clear protocols for reporting discrimination.
Federal contractors face the sharpest version of this problem, with enforceable obligations running in both directions.
On the federal side, EO 14173 requires contractors to certify compliance with federal anti-discrimination laws, with False Claims Act (FCA) exposure for false certifications. EO 14398 and Federal Acquisition Regulation (FAR) 52.222-90 go further, prohibiting “racially discriminatory DEI activities” as a contract term in solicitations and contracts. DOJ has announced three multimillion-dollar FCA settlements under this framework and has encouraged swift action on qui tam complaints.
On the state side, the guidance tells federal contractors operating in the signatory states that proactive measures to identify and prevent disparate impact are lawful, expected, and enforceable. Private plaintiffs retain an independent right of action under Title VII regardless of the federal enforcement posture. The key terms “racially discriminatory DEI activities” and “illegal DEI” remain vaguely defined, and courts have said so.
A federal investigation asks whether practices constitute intentional discrimination or prohibited DEI activity. A state investigation asks whether those same practices produce unjustified disparate impacts. The same facts can trigger both at the same time, and the allegations will look nothing alike. Contractors may wish to map the risks from each direction, build a compliance approach that accounts for both, and do the work under privilege.
Next Steps
Federal enforcement, state enforcement, and private litigation will each evaluate the same employer practices differently. Employers may wish to consider, under privilege:
- Establishing a unified compliance position that addresses federal, state, and private plaintiff exposure simultaneously, including how workforce data is collected, analyzed, stored, and protected from discovery.
- Confirming that hiring, promotion, and termination practices are tied to job-related requirements, merit-based, documented, and free of equal employment opportunity violations.
- Auditing AI and algorithmic tools used in employment decisions for potential disparate impact, particularly in the signatory states where enforcement and litigation targeting these tools are already underway.
- For federal contractors, mapping EO 14173, FAR 52.222-90, and SAM.gov obligations against the signatory states’ enforcement expectations, with attention to DOJ’s False Claims Act posture.
- Monitoring state enforcement developments, because the federal state divergence is widening and additional states may follow.
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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