President Trump issued Executive Order 14281, which purports to eliminate disparate impact discrimination, but can a President do that?

Disparate impact discrimination refers to discrimination that is proven by the existence of a discriminatory outcome, but instead of being based on a discriminatory act undertaken with discriminatory intent, it is based on a neutral policy that is not required to be proven to be based on discriminatory intent.

3 Takeaways from the EO:

1. Elimination of Disparate Impact: The order's primary goal is to eliminate the use of "disparate-impact liability" in federal contexts. 
2. Revocation of Regulatory Approvals: The order revokes specific presidential approvals of Department of Justice Title VI (i.e., funding recipients prohibition on discrimination based on race, color, and national origin) regulations related to disparate impact.
3. Review and Revision of Existing Regulations and Cases: Federal agencies, including the EEOC and DOJ, are tasked with reviewing and revising existing regulations, pending investigations, and consent judgments that rely on disparate-impact theory.   

However, eliminating disparate impact is a topic for Congress, not the President. 

In fact, this EO is inconsistent with Statutory/Case Law and rises the potential for lawsuits. To be clear, Title VI, which is the main thrust of this EO, can be established by disparate impact analysis based on Supreme Court precedent from Lau v. Nichols. As to Employment Discrimination (i.e., Title VII of the Civil Rights Act of 1964), disparate impact is also a valid legal theory for proving employment discrimination based on the Supreme Court in cases like Griggs v. Duke Power Co. Similarly, the Fair Housing Act and the Equal Credit Opportunity Act also recognize disparate impact. This order attempts to undermine these protections, potentially leading to increased employment, education, housing, and credit discrimination. Moreover, the Executive Order's argument that disparate-impact liability violates equal protection is flawed. Equal protection aims to prevent discriminatory outcomes, not give paths to discriminate. 

That is all not to say whether the Trump Administration is right or wrong on their policy initiative to revoke disparate impact analysis while focusing on a meritocracy. Instead, this is to say that this should not be undertaken by an ineffective Executive Order, but instead it needs to happen legislatively through Congress. By doing it this way, the Trump Administration is going to create confusion for business that results in more discriminatory lawsuits because decision-makers will trust the EO to do what it purports to do while it likely does not much of anything at all. 

Landlords and brokers should pay close attention to Long Island Housing Servs. Inc. v. NPS Holiday Square LLC in the Eastern District of New York. 

This case addressed whether minimum income requirements for rentals are discriminatory. 

What do you think?

Should a landlord be able to screen tenants based on their income?

The landlords in this case utilize "a two-to-one income requirement, which generally requires applicants without housing vouchers to have an income double the monthly rent." If they have vouchers, the vouchers are credited "as one month's rent and [the] applicants [] have [to have] an income equal to between 80 percent and 100 percent of one month's rent." 

To be discriminatory, this policy would have to have "'a significantly adverse or disproportionate impact' on housing voucher users." 

Currently the plaintiffs and defendants are battling over experts, but this case is going to teach landlords, brokers, property managers, and the like how to frame their policies moving forward. 

So, keep a close eye on this one. 

In housing discrimination, you can't treat people differently in the terms, conditions, privileges, and/or availability of housing. 

Yet, you aren't just responsible for your intended acts of discrimination, known as disparate treatment discrimination. Instead, you are also responsible for your unintended acts that impact groups of people as a secondary effect, which is known as disparate impact discrimination.

Think about it this way, if you don't rent to women, as a policy, that is clearly an act of disparate treatment sex discrimination. However, if you don't rent to long-haired people, aren't you still impacting women in sex discrimination under a different name? That is called disparate impact discrimination.

As to disparate impact discrimination, President Biden just ordered HUD to make sure that the regulations on disparate impact discrimination is preventing practices with an unjustified discriminatory effect. 

Do you think that there should be disparate impact discrimination laws? If so, what do you think they should be? 

Effective October 26, 2020, HUD implemented a new disparate impact fair housing standard.

Disparate impact discrimination occurs when housing practices have an unjustified discriminatory effect even though they were not motivated by a discriminatory intent. 

The new standard exists at 24 CFR 100.500 and it makes a claim of disparate impact discrimination far harder to bring and even harder to prove as compared to the prior HUD standard.

Previously, the regulation did not contain an express pleading standard and instead, only required the plaintiff to prove "that a challenged practice caused or predictably will cause a discriminatory effect." 

Now a plaintiff must "sufficiently plead facts to support each of the following elements: (1) That the challenged policy or practice is arbitrary, artificial, and unnecessary to achieve a valid interest or legitimate objective such as a practical business, profit, policy consideration, or requirement of law; (2) That the challenged policy or practice has a disproportionately adverse effect on members of a protected class; (3) That there is a robust causal link between the challenged policy or practice and the adverse effect on members of a protected class, meaning that the specific policy or practice is the direct cause of the discriminatory effect; (4) That the alleged disparity caused by the policy or practice is significant; and (5) That there is a direct relation between the injury asserted and the injurious conduct alleged."

With respect to the 3rd element, that is a very heavy burden for a plaintiff to satisfy at the pleading stage of litigation because the requisite evidence is often unavailable until the parties have engaged in the discovery process. 

Moreover, while the prior regulation provided that a defendant would then have to rebut the claim by "proving that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests[,]" a defendant now can just rebut the first element "by producing evidence showing that the challenged policy or practice advances a valid interest (or interests) and is therefore not arbitrary, artificial, and unnecessary." Changing the term from a "substantial" interest to "a valid interest" results in the defendant's burden seemingly being far lower.

Moreover, under the new standard, once the defendant rebuts the first element, "the plaintiff must prove by the preponderance of the evidence either that the interest (or interests) advanced by the defendant are not valid or that a less discriminatory policy or practice exists that would serve the defendant’s identified interest (or interests) in an equally effective manner without imposing materially greater costs on, or creating other material burdens for, the defendant." Previously, this was the defendant's burden. 

Regardless, there are now also 3 express defenses available, including that "(i) The policy or practice is intended to predict an occurrence of an outcome, the prediction represents a valid interest, and the outcome predicted by the policy or practice does not or would not have a disparate impact on protected classes compared to similarly situated individuals not part of the protected class, with respect to the allegations under paragraph (b). This is not an adequate defense, however, if the plaintiff demonstrates that an alternative, less discriminatory policy or practice would result in the same outcome of the policy or practice, without imposing materially greater costs on, or creating other material burdens for the defendant. (ii) The plaintiff has failed to establish that a policy or practice has a discriminatory effect under paragraph (c) of this section. (iii) The defendant’s policy or practice is reasonably necessary to comply with a third party requirement, such as a: (A) Federal, state, or local law; (B) Binding or controlling court, arbitral, administrative order or opinion; or (C) Binding or controlling regulatory, administrative, or government guidance or requirement."

Housing participants should be particularly interested in the third available defense in the form of a controlling administrative opinion or binding regulatory guidance. It is strenuously suggested that every housing industry participant seeks such opinion or guidance as a necessary incident of any business plan covering a new product or service. To fail to do so is just reckless in a world where such a defense exists. 

That being said, it is noted that this regulation only pertains to a federal housing discrimination claim and states and locales may offer increased protections to their citizens. So, these other laws must also be analyzed for housing participants to the extent that they afford disparate impact claims (e.g., NYC Admin. Code).