NJ Division on Civil Rights Proposes Rule Clarifying Disparate Impact Discrimination

By Heather Boshak and Sara Bernstein

The New Jersey Division on Civil Rights (DCR) recently issued a proposed rule which, if adopted, would codify and set forth the legal standard required in disparate impact claims brought under the New Jersey Law Against Discrimination (LAD). Although disparate impact claims have long been recognized under the LAD, the proposed rule clarifies the showing required to establish or defend claims of disparate impact in the contexts of employment, housing, housing financial assistance, place of public accommodation or contracting settings.

In the employment setting, disparate impact refers to conduct or practices and policies that appear neutral on their face, but disproportionately impact individuals based on characteristics protected under the LAD. That includes, but is not limited to, race, religion, national origin, ancestry, sex, sexual orientation, gender identity or expression, and disability.

The Burdens of Proof

Under the proposed rule, which was issued June 3, 2024, an individual challenging an employer’s practice or policy must use empirical evidence to show that the practice or policy has a disparate impact on members of a protected class. Hypotheticals or speculation are insufficient to meet this burden, but anecdotal evidence could be introduced along with empirical evidence, such as applicant selection rates by gender.

In the face of such a showing, an employer would need to show that “the challenged practice or policy is necessary to achieve a substantial, legitimate, nondiscriminatory interest,” which means that the practice or policy must have “a demonstrable relationship to successful performance of the job and measures the person’s fitness for the specific job” and is consistent with a legitimate business necessity. To meet this burden, an employer must also put forth empirical evidence. Of note, especially in view of the recent ruling by the U.S. Supreme Court on affirmative action programs in education, the proposed rule specifically allows that “[a]n interest in achieving diversity or increasing access for underrepresented or underserved members of a protected class may constitute a substantial, legitimate, nondiscriminatory interest.”

The burden would then shift back to the employee to show that “there is a less discriminatory, equally effective alternative means of achieving the substantial, legitimate, nondiscriminatory interest.”

Examples of empirical evidence that could be presented by the parties include: 1) national or local statistics; 2) applicant or employee files; 3) applicant or employee selection, suspension, pay setting, and termination rates by a protected characteristic; and 4) labor market data.

Practices Subject to Scrutiny

The proposed rule highlights certain practices and policies that could be susceptible to disparate impact claims, unless there is a substantial, legitimate or nondiscriminatory interest, and the absence of a less discriminatory, equally effective alternative that would achieve the same interest. Those include:

• Pre-Employment Practices such as reliance on word-of-mouth referrals and certain automated employment decision tools.
• Employment Practices such as language restrictions; citizenship requirements; height and/or weight requirements; health or physical ability requirements; dress and/or appearance requirements; driver’s license requirements; and excluding applicants from consideration based on criminal history.

Some examples provided by the proposed rule address some fairly standard practices such as:

• Word-of-mouth referrals could improperly limit the applicant pool, especially if the current workforce is mostly homogenous.
• A height restriction could have a disparate impact on employees or applicants based on gender, national origin, ancestry or disability.
• The ability to lift a certain number of pounds could have a disparate impact based on gender, age or disability.
• Prohibition of hats or head coverings could be problematic for certain religions, noting that such a policy could avoid a disparate impact by explicitly allowing for requests for religious accommodations.

The proposed rule does not create any new cause of action, but seeks to provide greater clarity on liability for a disparate impact claim. The proposed rule is subject to a notice-and-comment period through August 2, 2024.

For more information about how to evaluate your practices under a disparate impact analysis, please contact Heather R. Boshak at [email protected], Sara H. Bernstein at [email protected], or another member of our Labor & Employment Department.