Employers facing potential pay discrimination claims have historically faced two basic types of claims: disparate treatment claims and disparate impact claims. Because disparate impact claims are easier to raise on a class basis, employers have been particularly concerned about potential liability for disparate impact. Recently, the Trump administration directed the Equal Employment Opportunity Commission (EEOC) to discontinue pursuing disparate impact claims under Title VII, the Equal Pay Act, or any other federal civil rights statutes. This change will have a significant impact on employers in the context of pay equity.
Title VII and the EPA permit plaintiffs to proceed on two basic theories: disparate treatment and disparate impact. Disparate impact claims, first outlined by the United States Supreme Court in Griggs v. Duke Power Co., allow an employee to argue that the employer engaged in practices that resulted in a differential impact on employees based on their protected class status. Disparate impact claims can be brought without proof of intent by the employer – an employer practice that affects employees could be enough to establish a claim, even if the employer did not intend to discriminate. For example, an employer policy that bases starting salaries on the applicant’s salary at their prior position might have a disparate impact on female applicants, who are less likely to claim high wages and are often paid less than male applicants, given the prevalence of unequal pay throughout the American economy. Even if the employer did not intend to discriminate based on gender, an employee could assert a disparate impact claim based on the practice.
Employers faced disparate impact claims not only from private litigants but also from government actors. In particular, in the pay equity context, the EEOC has asserted class claims against employers based upon facially neutral practices that the EEOC argued resulted in a disparate impact on protected classes. Given the power and resources available to the EEOC, such claims were particularly dangerous for employers. Now, however, all of that has changed. The Trump administration issued an executive order entitled “Restoring Equality of Opportunity and Meritocracy” on April 23, 2025. Among other things, the executive order directs the EEOC and other federal agencies not to pursue claims of disparate impact. As a result, employers will no longer face disparate impact claims from government agencies, including the EEOC.
This will result in a significant reduction of employer exposure to pay equity claims. The EEOC, given its resources, reputation, and sophistication, posed a significant risk to employers proceeding on a disparate impact basis. Certainly, private litigants can raise disparate impact claims in the future. However, privately litigants do not possess the resources of the EEOC. Employers will therefore see a reduced risk of pay equity class claims on a going-forward basis.
