Labor & Employment Law Daily Wrap Up, FEDERAL REGULATIONS—Disparate impact liability eliminated for recipients of federal funding, (Dec 10, 2025)

By Patricia K. Ruiz, J.D.

The DOJ stated that new rule ensures recipients of federal funding “will be judged on their action conduct, not on statistical outcomes or circumstances beyond their control.”

A final rule from the Department of Justice (DOJ) amends regulations implementing Title VI of the Civil Rights Act of 1964 to eliminate disparate-impact liability for recipients of federal funding. The rule, which carries out instructions in Executive Order (EO) 14281, Restoring Equality of Opportunity and Meritocracy, is effective today.

Statutory and constitutional concerns. According to DOJ, the term “disparate impact” refers to “the concept of imposing liability on a federal fund recipient only because there may be different outcomes for different people, not based on prejudice or intent.” The final rule states that DOJ chose to eliminate disparate-impact liability to “more closely align its regulations to the language that Congress enacted in Title VI prohibiting intentionally discriminatory conduct,” stating that there are serious statutory and constitutional concerns with the legality of Title VI regulations that go beyond intentional discrimination by prohibiting conduct that has an unintentional disparate impact. The final rule details several Supreme Court decisions in which it states the Court has made clear that Title VI prohibits only “intentional discrimination” and “permits” facially neutral policies that result in disparate outcomes when there is no discriminatory intent.

Elimination of disparate-impact liability. The rule rescinds the full text of 28 CFR 42.104(b)(2), which prohibits the utilization of “criteria or methods of administration which have the effect of subjecting individuals to discrimination because of their race, color, or national origin.” Further, the rule removes the two uses of the phrase “or effect” from 28 CFR 42.104(b)(3) and rescinds the full text of 28 CFR 42.104(b)(6), which concerns the use of affirmative action and provides that funding recipients may and sometimes must use race, color, or national origin to overcome unintentional disparate “effects,” but, according to the final rule, does not expressly specify that the funding recipient must narrowly tailor such use nor that such use must serve a compelling government interest, as is required to satisfy strict scrutiny. Finally, the rule rescinds the full text of 28 CFR 42.104(c)(2), which addresses prohibited discriminatory employment practice and extends beyond intentional discrimination to prohibit conduct that “tends” to have a discriminatory effect.

News: FederalRegulations AgencyNews Discrimination IndividualRights WhiteHouseNews