New Jersey Adopts New Rules Clarifying and Reinforcing Disparate Impact Liability

Quick Hits

• On December 15, 2025, New Jersey issued rules codifying disparate impact liability under the Law Against Discrimination (LAD) across various sectors, including employment, by clarifying that neutral practices with a disproportionately negative effect on protected classes could violate the law unless proven necessary for a legitimate business interest.
• The rules clarify a burden-shifting framework for disparate impact claims, requiring complainants to demonstrate impact and employers to provide empirical evidence justifying their policies as necessary to meet substantial, legitimate interests.
• The regulations address employers’  use of automated employment decision-making tools, highlighting that such practices must be carefully evaluated to avoid inadvertently creating a disparate impact.

The new “Rules Pertaining to Disparate Impact Discrimination,” New Jersey Administrative Code (N.J.A.C.) 13:16, clarify existing standards recognized under the LAD, applying to employment, housing, public accommodations, and contracting. The rules recognize disparate impact liability, the burden-shifting framework for a disparate impact claim, and outline potential examples of employment policies or practices that might be found to have a disparate impact, including employers’ use of automated decision-making tools.

Disparate Impact Standard

The rules clarify that disparate impact under New Jersey law refers to a claim that a practice, neutral on its face and not intended to discriminate, disproportionately negatively affects members of a protected class as shown by empirical evidence where the practice is not “necessary to achieve a substantial, legitimate, nondiscriminatory interest” and there is no alternative to achieve the same result.

The new final rules differ from the proposed rules. The proposed rules originally stated that to establish a disparate impact claim, a complainant would have been required to  show that a less discriminatory alternative be “equally effective” in achieving a “substantial, legitimate, nondiscriminatory interest.” The final rules removed the “equally effective” language. The DCR explained that “[r]emoving the term ‘equally effective’ clarifies the Division’s intent that less discriminatory alternatives need not be equal in all responses to the challenged practice or policy.” The DCR further explained that removing “equally effective” aligns the disparate impact rules more closely with New Jersey case law, existing federal standards for the U.S. Department of Housing and Urban Development (HUD), and precedent established by the U.S. Court of Appeals for the Third Circuit. Notably, the DCR said “such a requirement would make it substantially more difficult to establish that a practice or policy that has a disproportionately negative effect on the basis of a protected characteristic violates the LAD.”

The final rules also apply to any “complainant” who files a complaint alleging an LAD violation, whether in court or arbitration—a broader definition than the proposed regulations had suggested. The proposed regulations had referred to “any person filing a complaint alleging unlawful discrimination pursuant to the Act,” which the DCR explained limited potential covered claimants to those filing verified complaints in court.

Burden-Shifting Framework

The final rules clarify a typical burden-shifting framework in a disparate impact claim. Once a complainant shows a policy or practice has a disparate impact, the employer then “has the burden of showing that the challenged practice or policy is necessary to achieve a substantial, legitimate, nondiscriminatory interest.” This is “equivalent to whether the practice is job related and consistent with a legitimate business necessity.”

To meet its burden, a party must “provide empirical evidence, meaning evidence that is not hypothetical or speculative, to support its allegations,” according to the rules. The rules note that anecdotal evidence is not sufficient on its own, but it may be introduced in conjunction with empirical evidence.

Employment and Pre-Employment Practices

The new rules outline how employers may be held liable for disparate impact resulting from actions taken both during and before employment, such as selection procedures or recruiting activities.

The rules specifically highlight other employment practices that may give rise to disparate impact liability, including language restrictions, citizenship requirements, height and/or weight restrictions, health or physical abilities requirements, dress codes, driver’s license requirements, and criminal history restrictions. Additionally, policies or practices that negatively affect pregnant employees may also be considered to have a disparate impact on them.

The rules explicitly state that they do not preclude “affirmative efforts to utilize recruitment practices to attract an individual who is a member of an underrepresented or underserved members of a protected class covered by the Act.” Instead, the rules encourage employers to advertise job openings or promotion opportunities to members of protected classes, ensuring they are aware of them and are not relying on “word-of-mouth recruitment” that “actually or predictably results in a disproportionately negative effect on potential applicants who are members of a protected class.” By way of example, a “practice or policy of relying on word-of-mouth recruitment by its mostly Hispanic work force may violate the Act if the result is that almost all new hires are Hispanic.” The rules explain that such recruitment may be limited to the “networks or communities of current employees” and potentially result in a disparate impact against to others not associated with those networks or communities.

Automated Tools or AI

The rules specifically highlight that employers’ use of “automated employment decision tools” to make employment- and hiring-related decisions or screen out applicants based on their schedule could have a disparate impact on members of protected classes. Further, the rules state that use of such tools “that [have] not been adequately tested and shown to not adversely affect people in a protected class before [their] use may have a disparate impact on members of that protected class.”

While “artificial intelligence” (AI) or “machine learning” is not expressly referenced, the rules define automated employment decision tools similarly, as “any software, system, or process that aims to automate, aid, or replace human decision-making relevant to employment,” including “tools that analyze datasets to generate scores, rankings, predictions, classifications, or some recommended action(s).” However, state restrictions on AI are in question as President Donald Trump signed an executive order in December 2025 asserting federal preemption over AI regulation.

Disparate Impact More Broadly

In releasing the rules, the DCR addressed comments arguing that disparate impact, in and of itself, is unlawful, stating that the rules “codify existing legal rights and precedents” and that disparate impact discrimination is a “well-established legal concept” already prohibited under the LAD and recognized under Title VII of the Civil Rights Act of 1964.

While the disparate impact rules are not meant to create new standards, they reinforce the validity of disparate impact claims under New Jersey’s nondiscrimination law. According to a statement announcing the new rules from the office of New Jersey Attorney General Matthew J. Platkin, “[t]he rules cement critical state-law civil rights protections just as the Trump Administration has moved to reverse key protections against disparate impact discrimination at the federal level.”

The New Jersey rules come on the heels of the U.S. Department of Justice’s issuance of a final rule removing liability for disparate impact discrimination under regulations implementing Title VI of the Civil Rights Act of 1964, which applies to state and local government agencies, nonprofits, schools, and government contractors. In April 2025, President Trump signed an executive order calling for an end to disparate impact and ordering federal agencies to stop enforcement of antidiscrimination laws based on such theories.

Next Steps

Employers in New Jersey may want to take note of the new disparate impact rules and how they clarify the disparate impact claims under the state’s antidiscrimination law. While codifying existing obligations, they also reinforce the fact that employers may face such claims in the state, regardless of whether federal authorities enforce federal antidiscrimination laws based on such theories. Employers may want to review their job advertisements, hiring processes, applicant screening procedures, and other employment decisions to analyze whether they disproportionately negatively affect members of protected classes.