Ep164: Disparate Impact Changes You Can't Miss

Speaker A: Hi, I'm Chuck Smikian.

Speaker B: And I'm John Toheimer. Welcome to the HR Stories podcast, where

Speaker A: there's a lesson in every story. Hey, John.

Speaker B: Yo, Chuck. What's going on, folks?

Speaker A: John and Chuck with the team at HR Stories Making workplaces better with every story that we share. And today is a little bit of a HR in the news. John. And this came out last week, and I really wanted to, uh, break it down for our listeners because this is one of those HR stories that sounds very legal, HR News story sounds very legal. Uh, but it really matters for everyday hr. You know, the Department of Justice announced last week that its Office of Legal Counsel and in regards to the EEOC's, uh, disparate impact guidelines. So, you know, we've seen so many changes, right? And we've talked about this. Different administrations go backwards, forwards. And in my professional personal opinion, I do think some of the things in the former administration under the Biden administration went a little too far. And now it is. It is, would be rubber banding back now. It's. But now it's shooting back through the starting line and going all the way over here. So this is really a kind of a crazy story for those of us that have been in HR for a while, that have followed, uh, guidelines for 5, 10, 15, 20, uh, ish years, since the early 90s when it came to a lot of, uh, EEOC cases. Anyways, this is an opinion that came out and it was connected to something called Executive Order 14, uh, 281, restoring equality of opportunity.

Speaker B: But that was April of last year.

Speaker A: Yeah, so Exactly April of 2025. In plain English, this Executive Order said the federal government should move away from using disparate impact liability. And I'm going to leave it to you in a little bit here to kind of define that, but avoid using disparate liability as much as possible and focus more on equal opportunity merit. And that's the word I was trying to get out of meritocracy. Okay.

Speaker C: Yeah.

Speaker A: More on intent. And that's a big word for this, uh, story today, and on individual decision making. So this is not just a random legal memo from the Department of Justice. It's part of a bigger shift on how the federal government may look at future discrimination claims.

Speaker B: I love that you put in there about the boomerang or the rubber band and how administrations will change and look at policies because they feel like they can, and they're like, okay, we're going to change this and we're going to do this. And I think this is a great example of, um, going. Pushing to the extreme, right? Pushing to the extreme, going, well, we can do it. This is the way we're going to do it. We'll get into this a little bit later, but it's not settled yet. I'm just going to say that up top, it's not settled. We'll talk about some of that as we go through. But this is really important for hr, right? This is really important because for years HR BIM people have been taught two big concepts when it comes to discrimination in the workplace. We have disparate treatment on one side and disparate impact on the other side. They sound similar, but they are not the same thing.

Speaker A: Yeah. And we've taught this in our HR classes for years. It's part, it's on the slides. It's on everything we've done for all of the, uh, seminars we've taught and you know, in our certification classes and our compliance classes, you know, when we talk about things like testing and background checks and promotions and physical requirements and now even AI hiring tools. So I want to slow it down just a bit and explain it, uh, for someone who may be newer to

Speaker B: hr, are newer to employment law.

Speaker C: Right.

Speaker B: Because these laws are not an HR thing. These laws are a business thing, a workplace business. The EEOC is about the workplace. Right. Kind of making sure that we're doing that. They deal with other things well, but really about the workplace. So let's talk about this. Disparate treatment is intentional discrimination. That means the employer treats someone differently than because of protected characteristics. It also means when you're being investigated, if you can't show documentation that that wasn't your intent. Right. That you had intended to fire that person because you hadn't intended to fire that person because of their protected class. Right. If you, if you don't have documentation like we're firing this person because performance wasn't good for the last six months and you don't have that documentation, disparate treatment can still show up there. Right? So let's say, Right. Let's say, Chuck, example, A manager says, I'm not hiring her because she is pregnant. Yeah. Or I don't want someone that age in this job.

Speaker A: Ouch.

Speaker B: Or I'm not going to promote them because of their religion.

Speaker A: Yep.

Speaker B: That is despair treatment. It's direct, it's intentional. Or it seems to be intentional, I. E. There's no documentation, people. We have to say it again and again and again and again. Documentation, documentation, documentation. Can I say it one more time? Chuck.

Speaker A: Yeah. And. And you know what? Despair treatment, based on all that you've said, is the easier one to understand because there is intent or there, there is intent or what?

Speaker B: Uh, or there look like there's intent.

Speaker A: Yeah. Or it looks like there's intent. Yeah. Which we've talked about before. If it looks like it, it's that prima facie, you know, on face value. So someone's making a decision because of race, sex, age, religion, disability, national origin, or any other protected category, depending on your state and locality.

Speaker B: Yeah, yeah. So exactly. Right. Um, disparate impact is different. Disparate impact happens when a rule looks neutral on paper and I would say also a policy. Right. It looks natural bump. But it ends up having a negative effect on a protected group. So let me give you a real life example. I'm not going to use the company's name. I have three of them you can ask. Okay, two or three. All right, we'll go with one. So there's a company that hires a lot of employees. It's a retail company, hires a lot of employees. And it's not Walmart. I see what you're thinking there, Chuck. It's not. But. So they hire a lot of employees and they put in a broad back criminal background check on all the employees.

Speaker C: Right.

Speaker B: They just made that decision and they got in trouble because there was disparage impact to black applicants at a much, much, much, much higher rate.

Speaker A: Yeah.

Speaker B: Than white applicants. And so that in the old administration and the administrations of the past, that would have been disparate impact. It was investigated by the EEOC. The company ended up giving the EOC $6 million and said, look, it's not our fault, sorry this happened. We're going, we'll just settle it for $6 million because we just don't want to deal with this anymore. And so the employer. Right. So kind of other examples, the employer may say, everyone has to pass this test. Everyone must have a college degree, physical ability test. Everyone has to pass this background check. On the surface, everyone is being treated the same.

Speaker A: Yeah.

Speaker B: But under disparate impact theory, HR has been trained to ask, does this rule screen out one of group a much higher rate? And let me give you another example before you jump in. And if it does, is this truly connected to the job? Right. And so there's another company that was doing a physical ability test for people in their company to get a job. And it ended, uh, up discriminating against female applicants over male applicants. And they got in trouble for that. That was disparate impact.

Speaker A: Yeah. So, so now, now we have to kind of go into why is this story such a big deal?

Speaker C: Right.

Speaker A: And, and why is it a big deal? Well, a couple of things, because for years we have taught, HR has been taught, uh, that even if you did not mean to discriminate, you still had to look at the result of that action. Um, you might, like you said, a neutral motive. A neutral, you might have a neutral policy, not even a bad motive, no discriminatory comments, no manager trying to exclude anyone. It's like I just bungled into this. But if the results created a negative impact on one protected group, that could still become a legal problem.

Speaker B: Yeah. And that's right. And so what happened was that the eeoc, based on executive order, whatever number you had given back in April, uh, April of 2025, Trump put that executive order in place and said, look, I don't want you to deal with this liability. I don't want you to sue anybody under disparate impact. So that's your boss and the boss, they're like, okay, we're not going to do that. The EEOC then reaches out the Department of Justice, can you do a legal review of this and let us know what you think? And then the dog came. The DOJ came back and said, we think is that employers may have pushed to focus too much on statistics and outcome and not enough on intent, merit and whether the employment state was actually job related and basically said, this is unconstitutional.

Speaker A: Yeah. And that's where it comes back to intent. The DOJ is basically saying that different outcomes alone should not automatically mean the employer discriminated. You know, they need to look at what caused the, the situation. So, you know, let's say it's testing. Uh, was it a specific test? Was it a degree requirement? Was it a background check rule? Was it an AI screening tool? And was that practice connected to the actual job?

Speaker B: Yeah. And I think the important point here is causation. Right. For a disparate impact claim, it's not enough. Say, oh, the numbers came out differently. You have to look at the specific employment practice and ask whether that practice caused the difference. And then you ask whether that practice is job related and consistent with business necessity.

Speaker C: Yeah.

Speaker A: So hold on one second here. Yeah, so there's also this idea of a less discriminatory alternative. So can you explain that kind of in plain English, John?

Speaker B: I don't know if I can, but I will try. So less than discriminatory alternative means if the employer has a legitimate business goal, is there another way to meet the same goal without creating the same negative impact. Right. And so think about hiring people to do a, uh, job and doing a physical ability test. And so you're doing something where they're in another location and they're in a weight room and they're lifting things up and that has disparage impact on female things. While the other less evasive way, less discriminatory way would be like, all right, we want to see, can you actually do the job? Can you go and lift that 40 pound box up, uh, 40 times an hour or whatever it is. Right. And so then it becomes a clearer, okay, this is it. This is the presenting on this. We can do that in there. So HR should ask, not only ask, can we defend this requirement? HR should also ask, is this the best way to measure what we actually need?

Speaker A: Yeah, so that makes sense. And let me just think about an example from my hospitality days. Okay? Hotel, uh, requires a, uh, maintenance engineer, like the maintenance person to pass a physical ability test. Now that may be perfectly reasonable. Maybe it's climbing ladders or lifting heavy things and that sort of thing. If, but it's reasonable if the job really requires lifting, climbing ladders, moving equipment and responding to these physical demanding situations. But HR still needs to ask, what does the test measure? How does it, how does it connect to the job? Are we applying it the same way to everyone? Are we judging the person's ability to do the job and not making assumptions about the person?

Speaker B: Yeah, I'm thinking about, I had someone in my class, Chuck, and they were in the education sector and in this particular case they were talking about hiring kitchen staff. Right. And so they had a requirement on the job description that said they had the people had to be able to lift 50 pounds. And so she was new to the HR role and she goes, 50 pounds. That seems like a lot. And so she went back and talked to the team that was doing the job and they're like, well, how often do you have to £50? Where does that requirement come from? And the manager said, well, we have these 55 gallon drums and they get filled up all the way. They weigh about 50 pounds. And so then she started talking to this dad, like, how often do you lift 50 pounds? Like, how often do you lift a, uh, full trash can? And they're like, rarely, like only, uh, typically we wait and it's about halfway fill, we know we're gonna grab it, it's £25, we take it and we go throw it in the trash can or throw it in the dumpster. And then she goes, well, when it gets filled, like, what do you do? She goes, oh, we always get two people on it.

Speaker C: Right.

Speaker B: Because we want to be safe. Right. And so that requirement of lifting 50 pounds wasn't realistic. Right. The requirement was more 25, 35 pounds. It may happen, but it wasn't happening on the job.

Speaker A: Right.

Speaker B: And so looking at those job descriptions

Speaker A: on creating maybe an unnecessary barrier. John, could. Could you go, um, maybe a little further into. As I know you've talked about AI, AI tools, and if you could kind of just, you know, go, uh, go further into, uh. Because I was going to talk about degree requirements, but I really want you, you know, talk about the, the AI hiring tools.

Speaker B: Okay, we can do that. Yeah, absolutely. Sorry, you caught me off guard, but I got it right. We're good. Uh, right, yeah. AI is the big thing, right? Boom. AI, AI, AI. Uh, in fact, I don't know if I told you this. I'm writing a course about AI and change management and how do we bring in AI? What are the right policies? What are those kind of things that we need to do? And so this becomes really important because if you're allowing your team whether you. So again, right, going back to what we talked in the last episode, if you're not saying not to do it, then you're allowing it.

Speaker A: Right.

Speaker B: So if you're allowing your hiring team to use AI, uh, that now becomes the test, that assessment. Right. So if you start using it for screening assessment, personality test or third party scoring systems, HR can't say, well, the system, uh, made the decision, you allowed it. Right. And we talk about this a lot in my AI classes. AI can do the work, you own the responsibility. Yeah. Right. HR still needs to know what the tool is measuring. Is it actually measuring what you think it's measuring?

Speaker A: Exactly right. And if the tool screens people out, you know, what, why, you know, why is it screening about? What criteria is it using? Is that criteria job related? And that's why hr, uh, HR people need to stay involved.

Speaker B: Yeah. I mean, that brings us to the practical tackle, right? The dog opinion. I'm just going to emphasize that word does not mean fairness no longer matters. It does not mean that employees should ignore the impact of their decisions. It does not mean HR should throw out everything we've been taught about disparate impact. And I can tell you why in a few minutes. But it does mean employers need to be very careful about making decisions based on protected characteristics just to make the numbers look right.

Speaker A: Yeah. And you know what? As Far as things swing back here, they get boomerang back. And so you really just need to make smart decisions. Uh, do not discriminate intentionally. Because you brought up a key point there. Right. We should not discriminate intentionally. We should not ignore unfair barriers to employment and promotions. And we should also not make hiring decisions, promotion or employment decisions based on someone's race, sex, religion, or any other protected category. Just to fix the numbers.

Speaker B: Yeah, I mean, that makes good sense.

Speaker C: Right? Good.

Speaker B: HR lives in the middle. Fair process, consistent standards, job related criteria, clear documentation, individual decisions, all are critical for us to make sure. And documentation, documentation, documentation. You didn't let me say it the last time. And documentation.

Speaker A: Yeah. So here's the Monday morning takeaway. Or maybe it's Tuesday or Wednesday morning. For those of you that just listening, if, uh, you're using a test, a background check, a degree requirement, physical standard, ask the questions again, is it job related? Can we explain the business reason? Are we being consistent? Are we evaluating the person as an individual? And, you know, again, are we avoiding decisions based on protected characteristics?

Speaker B: Yeah. And so I want to add a couple more things here. The first one is what we have to understand, right? So understand this. Pull back a little bit is that the EOC went to the dog and said, hey, can you get us, give us some backing on this so we can do this? The DOJ said, hey, we think this is unconstitutional. It's still the wall. The law has not been removed. It's from the Civil Rights act of 1964. It is disparate of impact, is still the law. This will be challenged in court. I can guarantee it. But besides that, right? Besides all of that, it's still on state books and you could still be sued on the civil level. So I would be very careful about making like, uh, we're just going to

Speaker C: get rid of it.

Speaker B: We're not going to think about it. And you have not said that at all, Chuck. But I do think people are like, oh, and we don't have to worry about it anymore. I think there's still a big risk. And so I would definitely kind of think about that. And then also when you're thinking about looking at this and what we're doing, if, uh, the only reason you're doing something is we have always done it this way, that is a good sign. You should start reviewing your policies.

Speaker A: Yeah. So just to clarify, it's the doj, not the dog. Oh, well, you know, I thought it was pretty funny. The dog. What's up, dog? The Department of Graphics yeah, There you go. Okay, so let's wrap it up. At the end of the day. May sound like a legal update, folks, but we. We wanted to play it out a bit more because for hr, this is really a reminder. Fairness isn't just about final numbers. It's about the process. It is about intent and using those standards that actually connect to the job. And, well, it's about being able to explain why we made the decision we made. And do not rely on memory. You must rely on John.

Speaker B: Documentation.

Speaker A: Documentation. And that is what keeps HR in the right lane. And you can stay in the right lane, too, by continuing to listen to HR Stories podcast, where we're going to help make your workplace better. And I just got to point out, John, our book. Still. Yeah, still. It, uh, still. It's Sherm approved and, uh, worth three recertification credits. The ultimate guide to hr. Yes.

Speaker B: If you're at the conference, hopefully you picked one up. If you didn't, let us know. If you did pick one up, let us know. Reach out to us. Let us know. Hey, I picked one up. It's great. It's fantastic. Would love to hear from all of you around that how you're using it. Have you got coffee stains on it yet? My M goal.

Speaker A: All right. And you've been listening to the HR Stories podcast again, where we help make workplaces better. And there's a lesson in every story.

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