On April 22, 2025, the Trump administration issued an executive order titled: “Restoring Equality of Opportunity and Meritocracy.” The order directs federal agencies to no longer use disparate impact theory when enforcing anti-discrimination laws.
Here’s what’s included in the order, what it means for total rewards, compensation, and compliance leaders, and how Trusaic’s pay equity methodological prowess ensures you remain compliant.
What the Executive Order Says
The Executive Order directs federal agencies to:
- Review and revise existing regulations to ensure that liability for disparate impact is imposed only when it is clearly authorized by statute.
- Clarify when disparate impact analysis can be used, aiming to limit its application where statutory text does not explicitly allow it.
- Consider the costs of compliance and “unintended consequences” of disparate impact liability in agency rulemaking.
Importantly, the order does not eliminate disparate impact as a legal theory, but seeks to limit its reach and reinterpret its application within federal enforcement frameworks.
What Is Disparate Impact?
Disparate impact refers to employment practices that appear neutral on the surface but result in a disproportionate adverse effect on members of a protected class — such as women, people of color, or individuals with disabilities — even if there is no discriminatory intent.
An example of this is an employer basing starting salaries on a candidate’s previous salary. This practice is neutral on the surface if it applies to all candidates but could perpetuate existing gender or racial wage gaps if candidates were underpaid in a prior role. Many states and localities in the U.S. have banned this practice for that very reason.
Other examples of disparate impact policies include:
- Requiring a certain educational attainment that is not relevant to the job duties (e.g. master’s degree for an entry-level position).
- Using AI trained on biased historical data to screen resumes during the recruitment and hiring process.
- Automatically increasing pay based on tenure or time in a role, which could disparately impact women who take time off for maternity leave and fall behind in compensation even if they perform equally (“Motherhood Penalty”).
The executive order may lead to narrower enforcement of disparate impact claims by federal agencies. They are instead instructed to focus on enforcing intentional discrimination claims, which are policies that are not neutral on the surface.
What This Means for Employers
Similar to prior executive orders by the Trump administration, employers should not interpret the order as a green light to relax compliance efforts. Here’s why:
- State and local laws still apply: Many jurisdictions have robust pay equity and anti-discrimination laws that embrace disparate impact theory. Employers must still comply with these broader obligations.
- Private litigation risk remains: Plaintiffs in private lawsuits can continue to use disparate impact as a legal argument under Title VII of the Civil Rights Act and other statutes.
- Regulatory uncertainty: A shift in administration in 2029 or even congressional action could undo or override the current executive order, leaving unprepared employers exposed.
How Trusaic Helps You Stay Ahead
Trusaic’s approach to pay equity is built on a foundation of legal defensibility, data transparency, and actionable insights. While enforcement priorities may shift, the fundamental principles of fair pay, risk mitigation, and proactive compliance remain critical.
Our PayParity® solution empowers employers to:
- Identify and remediate unjustified pay disparities, using rigorous statistical methodology.
- Meet evolving compliance requirements, whether at the federal, state, or local level.
- Create a legally defensible pay structure that can withstand scrutiny — even under changing legal interpretations.
- Prepare for future regulations by embedding pay equity and transparency into your compensation decisions today.
In addition, our R.O.S.A. (Remediation Optimization Spend Analysis) tool ensures that organizations optimize their remediation strategy with cost-efficiency and strategic clarity.
Final Thoughts
The Trump administration’s Executive Order on disparate impact may limit how federal agencies pursue certain types of employment discrimination claims — but it does not eliminate employer responsibility.
For organizations committed to fair, equitable, and legally sound compensation practices, this is the time to evaluate and enhance your pay equity infrastructure.
Trusaic is here to help you do just that — with solutions that bring clarity, control, and compliance to your workforce strategies.