On December 17, 2025, the New Jersey Attorney General announced that the Division on Civil Rights adopted new rules clarifying disparate impact discrimination liability under the New Jersey Law Against Discrimination. The rules, which were formally adopted on December 15, 2025 and published in the New Jersey Register, address disparate impact discrimination across multiple regulated areas, including employment, housing, places of public accommodation, financial lending, and contracting.
The adopted rules codify existing New Jersey case law and address how disparate impact liability applies across a range of regulated activities under the New Jersey Law Against Discrimination, including the following:
- Clarified disparate impact standard. The rules explain that a facially neutral policy or practice may violate the Law Against Discrimination if it causes a disproportionate adverse effect on a protected class, unless the regulated entity can show the practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest and no less discriminatory alternative is available.
- Employment, housing, and lending practices. The rules provide examples of how disparate impact liability may arise from employer hiring practices, housing provider screening criteria, and financial lending standards, including the use of credit history, criminal history, income thresholds, and other neutral eligibility requirements.
- Requirement to consider less discriminatory alternatives. The rules emphasize that a practice may still violate the statute even if it serves a legitimate interest where an alternative approach could achieve the same objective with a less discriminatory effect.
- Use of artificial intelligence and automated tools. The rules explain how disparate impact analysis applies to employers’ use of automated decision-making tools, including online application screening systems and facial analysis software used in hiring.
- Covered protected characteristics. The rules reaffirm that disparate impact protections apply to discrimination based on race, national origin, religion, sex, gender identity and expression, disability, sexual orientation, and other protected characteristics
Putting It Into Practice: These rules highlight a growing gap between federal enforcement priorities and state approaches to fair lending (previously discussed here). Covered entities should ensure they review existing policies and compliance frameworks for alignment with New Jersey law.
