January 5, 2026

While the federal government has recently de-emphasized enforcement actions targeting employer policies with a disparate impact on protected groups, New Jersey is moving decisively in the opposite direction. The New Jersey Division of Civil Rights (“DCR”) has issued new rules underscoring its intent to strictly enforce the New Jersey Law Against Discrimination (“NJLAD”) in this area.

New Jersey employers should take note: even facially neutral employment policies may now face heightened scrutiny and enforcement risk.

What Is a “Disparate Impact” Employment Policy?

A disparate impact policy is a policy or practice that:

1. Is neutral on its face and applies to all employees or applicants, but
2. Disproportionately and adversely affects members of a protected class (including race, religion, sex, national origin, disability, and other protected characteristics).

Notably, discriminatory intent is not required. Liability may arise solely from the effect of a policy.

When Does a Policy Become Impermissible?

To challenge an employment policy, an applicant or employee must:

1. Identify a specific employment policy or practice, and
2. Demonstrate that it treats a protected class less favorably than another group.

Once this showing is made, the burden shifts to the employer.

Employer’s Burden

To justify a policy with a disparate impact, an employer must demonstrate that the policy:

1. Is job-related,
2. Serves an actual and legitimate business need,
3. Is necessary to achieve that need, and
4. Cannot be replaced with an alternative that would achieve the same goal with less harm to a protected group.

This is a demanding standard, and the DCR rules make clear that New Jersey intends to enforce it aggressively.

Policies Most Likely to Draw Scrutiny

Disparate impact concerns can arise with virtually any employment practice or policy, but employers should be particularly cautious with respect to:

1. Criminal background check policies
2. Language or citizenship requirements
3. Dress, grooming, and appearance standards
4. Automated hiring or promotion tools
5. Resume filters and algorithmic scoring systems

Special Focus on AI and Automated Hiring Tools

The use of artificial intelligence and automated decision-making tools in hiring and promotion continues to grow. These tools may screen applicants, rank resumes, analyze facial expressions, or otherwise influence employment decisions.

Under the new New Jersey rules:

1. Employers will be held responsible for the disparate impact of third-party hiring tools, even when the tools are developed and administered by vendors.
2. Employers are required to take reasonable steps to ensure that such tools comply with New Jersey law.

At a minimum, this means employers should:

1. Carefully vet vendors of automated hiring tools,
2. Include representations and warranties confirming compliance with NJLAD, and
3. Seek indemnification protections in the event a tool results in employer liability.

Key Takeaway for New Jersey Employers

Although federal enforcement priorities may be shifting, New Jersey employers should expect increased state-level enforcement of disparate impact claims—particularly in connection with hiring practices and emerging technologies. Proactive policy review and careful vendor management are essential to minimizing risk.

If you have questions about how these new rules may affect your workplace policies or the use of automated hiring tools, please contact RRD Employment Practice Group Chair Robert W. Small at rsmall@regerlaw.com or 215-495-6500.