Reductions in Force Could Still Carry Disparate Impact Risk Nationally and in Colorado

Bayan Biazar, Associate

  Recent federal developments have prompted renewed attention to disparate impact liability in the context of reductions in force (“RIF”). In April of 2025, the Trump administration issued  Executive Order 14281[1] directing federal agencies, including the U.S. Equal Employment Opportunity Commission (“EEOC”), to de-prioritize disparate impact as a litigation and enforcement tool. Because disparate impact claims frequently arise from workforce reductions, the administration’s announcement has drawn attention to whether this shift meaningfully alters employer risk.

 Disparate Impact Remains the Law

            Disparate impact liability addresses employment practices that are neutral on their face but disproportionately affect employees in protected classes. In a RIF setting, this theory often arises when selection criteria such as performance ratings, job classifications, tenure, or compensation results in certain groups, including older workers, employees of color, or individuals with disabilities, being laid off at higher rates than others.

            While federal enforcement priorities may be changing, the underlying legal framework has not. Disparate impact was recognized by the U.S. Supreme Court decades ago and later codified into federal law.[2] An executive order altering agency priorities does not eliminate the doctrine or prevent courts from applying it.[3] As a result, disparate impact remains a viable basis for liability in employment litigation.

 Federal De-prioritization Does Not Eliminate Potential Exposure

            Even if the EEOC is less inclined to pursue disparate impact claims arising from RIFs, private plaintiffs remain free to bring those claims, and state enforcement agencies remain fully empowered to investigate and prosecute them under state law. Many states expressly recognize disparate impact theories and, in some cases, provide broader protections or remedies than federal law. As a result, reduced federal enforcement may shift disparate impact claims into state forums, with employees filing charges with state civil rights agencies and seeking early right-to-sue letters.

 Current Colorado Law and Potential Future Legislative Changes

            Under existing Colorado law, disparate impact remains a recognized theory of employment discrimination. Colorado’s statutory framework permits liability based on the effects of an employment practice while limiting the remedies available in such cases, reflecting a deliberate balance between outcome-based claims and claims involving purposeful discrimination.[4] Colorado law also directs courts to interpret these protections consistently with federal anti-discrimination standards, ensuring that disparate impact continues to play a meaningful role in employment litigation and workforce-reduction decisions.[5]

            Against this backdrop, Colorado lawmakers circulated draft legislation early in the 2026 legislative session addressing disparate impact under the Colorado Anti-Discrimination Act (CADA), but ultimately chose to postpone its introduction. The proposed legislation would have materially changed Colorado law by expressly codifying disparate impact discrimination under CADA. While current law prohibits discrimination generally and relies on courts and agencies to apply disparate impact principles by analogy to federal law, the proposal would have defined disparate impact by statute, established a clear burden-shifting framework, and applied that standard uniformly across employment, housing, public accommodations, education, and credit. [6]

 Employer Considerations

            The current enforcement climate does not eliminate disparate impact risk in RIFs. Employers implementing workforce reductions should continue to rely on clearly defined selection criteria, consistent application across employees, statistical analyses[7] to identify potential disparities, and thorough documentation of decision-making. These measures remain essential to managing legal risks, regardless of the shifting federal enforcement priorities.

[1] See https://www.federalregister.gov/documents/2025/04/28/2025-07378/restoring-equality-of-opportunity-and-meritocracy for the full Executive Order 14281.

[2] See Griggs v. Duke Power Co., 401 U.S. 424, 91 S. Ct. 849, 28 L. Ed. 2d 158 (1971); 42 U.S.C. § 2000e-2(k).

[3] See id.

[4] Colo. Rev. Stat. § 24-34-405.

[5] Id. at § (6)

[6] See https://files.constantcontact.com/de30c015101/3a817135-4d23-4c76-a7a2-63b881167d67.pdf for the draft legislation.

[7] In the RIF context, statistical disparate impact analyses generally compare selection rates for employees in protected categories against those of similarly situated employees outside those categories to identify meaningful disparities.