2026 Employment Law Update | Part 3

Employment Law Update

By: Shar Bahmani, Katya L. Norris, Evan Hiller, Paige Kemper, and Natalie Zarasian

Arizona businesses and employers are off to the races already in 2026, and with each new year brings new developments for Arizona employers to be mindful of. This article provides part 3 of Sacks Tierney’s 3-part 2026 Employment Law Update series. Below is a high-level review of some of the employment law developments over the last year and those changes taking effect in 2026.  This article is designed to provide an update regarding both Arizona and federal law.  While this provides a broad overview of recent developments, employers are encouraged to work directly with their local counsel for specific questions relating to the interpretation of law and the impact on their respective businesses. 

President Trump’s Executive Actions and a Move Away From Disparate Impact Claims

Upon assuming office on January 20, 2025, President Donald Trump immediately began taking executive actions (including issuing executive orders) directed towards reshaping employment practices and labor-management relations. 

In many cases, however, these executive actions only affect federal employees. For example, Executive Orders No. 14251 (Mar. 27, 2025) and 14343 (Aug. 28, 2025) exempt various agencies and departments from the federal service labor-management relations program.

In other cases, notably, the employment-related executive actions have an impact on federal contractors.  For example, Executive Order No. 14148 (Jan. 20, 2025) terminates “all DEI or DEIA performance requirements for employees, contractors, or grantees” (emphasis added).  And in a small number of cases, President Trump’s executive orders seek to reshape private-sector employment practices.

One high-impact executive action, noteworthy for private-sector employers, is Executive Order No. 14281, titled “Restoring Equality of Opportunity and Meritocracy.” EO 14281 declares that it is “the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible.”

As noted above, Title VII of the Civil Rights Act of 1965 prohibits employers from discriminating against workers on the basis of protected characteristics like race, religion, or gender.  In Griggs v. Duke Power Co., 401 U.S. 424 (1971), the United States Supreme Court ruled that Title VII prohibits “not only overt discrimination, but also practices that are fair in form, but discriminatory in operation.”  Thus, the prohibition on employment discrimination included workplace policies that had a disproportionate impact on a protected class (i.e., “disparate impact”) regardless of the policy being facially neutral and regardless of whether discrimination was intended by the employer.  Congress later codified the “disparate impact” standard into Title VII through the Civil Rights Act of 1991.

An Executive Order like EO 14281 does not have the ability to overturn Supreme Court precedent or statutory language, so both “disparate treatment” and “disparate impact” will remain forbidden by Title VII.  However, EO 14281 radically changes not only the federal government’s treatment of its own employees, but also its treatment of private employers and employees.  A Fact Sheet issued by the Trump Administration “directs all agencies to deprioritize enforcement of statutes and regulations that include disparate-impact liability” and “directs the administration to assess all pending investigations, lawsuits, and consent judgments that rely on a theory of disparate-impact liability.” See https://www.whitehouse.gov/fact-sheets/2025/04/fact-sheet-president-donald-j-trump-signs-landmark-order-to-restore-equality-of-opportunity-and-meritocracy/.

The impact of EO 14281 can be seen in the regulatory guidance issued by federal agencies. For example, the National Credit Union Administration has notified federally insured credit unions that it was removing reference to disparate impact from its “Fair Lender Guide” and other issuances and that “the NCUA has instructed its examiners that they will no longer request, review, or conclude on or follow-up on matters related to a credit union’s disparate impact risk, internal disparate-impact risk analysis, or disparate-impact risk assessment processes or procedures.” See https://ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/removal-disparate-impact. In brief, treatment of EO 14281 by federal agencies thus far suggests that, under the Trump Administration, federal agencies will cease utilizing data about the disparate impacts of facially neutral policies and will cease any enforcement of laws prohibiting policies that have a disparate impact on protected classes.

The EEOC’s Enforcement Priorities

The U.S. Equal Employment Opportunity Commission (“EEOC”) is the federal agency that investigates and enforces federal laws prohibiting employment discrimination, including Title VII of the Civil Rights Act of 1964 which applies to employers of 15 or more employees.  In January 2025, EEOC Chair Andrea Lucas stated that her enforcement priorities for the EEOC include:

• Rooting out unlawful DEI-motivated race and sex discrimination;
• Protecting American workers from anti-American national origin discrimination;
• Defending the biological and binary reality of sex and related rights, including women’s rights to single‑sex spaces at work;
• Protecting workers from religious bias and harassment, including antisemitism; and
• Remedying other areas of recent underenforcement.

National Origin Discrimination

The EEOC has stated in its enforcement priorities that it will work to eliminate policies that prefer hiring foreign workers over American workers.  The EEOC issued a poster entitled “Discrimination Against American Workers Is Against the Law” and updated its national origin discrimination website, underscoring that national origin discrimination protections extend to discrimination against Americans.  The EEOC notes it is unlawful discrimination to pay foreign workers less than American workers, and that covered employers are prohibited from hiring foreign workers over American workers even if the decision is based on customer preferences, lower labor costs, or other reasons.

Gender Issues

The legal landscape regarding gender identity, bathroom access, and sex discrimination under Title VII is evolving based on conflicting positions by recent Presidential Administrations. Under the Biden administration, the EEOC previously issued guidance finding that harassing conduct on the basis of sex under Title VII includes “denial of access to a bathroom or other sex-segregated facility consistent with [an] individual’s gender identity;” and “repeated and intentional use of a name or pronoun inconsistent with [an] individual’s known gender identity” during President Biden’s administration. While the EEOC Chair cannot unilaterally rescind this guidance, Chair Lucas has noted her disagreement with this guidance. Specifically, Chair Lucas stated that women have safety interests that warrant single-sex restroom facilities at work and her view is that it is not unlawful harassment or discrimination for a business to draw distinctions between the sexes in providing single-sex bathrooms. 

Religious Discrimination and Harassment

Title VII prohibits discrimination against employees on the basis of a sincerely held religious belief or practice and requires covered employers to accommodate employees’ sincerely held religious beliefs or practices unless doing so would impose an undue hardship on the business’ operations.  Chair Lucas indicated that her enforcement priorities include focusing on religious discrimination and harassment claims.  Chair Lucas stated, “During the previous administration, workers’ religious protections too often took a backseat to woke policies. Under my leadership, the EEOC is restoring evenhanded enforcement of Title VII—ensuring that workers are not forced to choose between their paycheck and their faith.”  https://www.eeoc.gov/newsroom/200-days-eeoc-action-protect-religious-freedom-work.

Discrimination against Employees is Unlawful, Regardless of Whether the Employee is in a Majority or Minority Group

In line with the new direction of the EEOC and its objectives is the U.S. Supreme Court’s 2025 opinion in Ames v. Ohio Dep’t of Youth Services, 605 U.S. 303 (2025).  In Ames, a heterosexual woman brought a discrimination claim against the Ohio Department of Youth Services (the “Department”) claiming that she was passed on for a position that was given to a homosexual male.  On summary judgment, the trial court found in favor of the Department, finding that Ames could not establish a prima facie case of discrimination under the burden-shifting framework established in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973) for evaluating disparate-treatment claims. In reaching this conclusion, the trial court reasoned that Ames failed to show background circumstances supporting the suspicion that the Department was that rare “unusual employer” who discriminates against the majority, such as evidence of a pattern of discrimination against majority-group employees or evidence that a member of the minority group made the promotion or demotion decision. The U.S. Court of Appeals for the Sixth Circuit affirmed.  However, the U.S. Supreme Court vacated and reversed the decision, finding that employees do not need to show background circumstances in reverse discrimination cases, reasoning that there was no support for any such heightened standard in the text of Title VII — which only prevents discrimination against “any individual” on the basis of protected groups and draws no distinction between minority and majority-group employees — or in case law construing Title VII.

To Prevail on a Disability Discrimination Claim, the Employee Must be Employed or Seeking Employment at the Time of the Alleged Disability Discrimination

On June 20, 2025, the Supreme Court of the United States issued its decision in Stanley v. City of Sanford, 606 U.S. 46 (2025), in holding that, to prevail on a claim for disability discrimination under the Americans with Disabilities Act, as amended (“ADA”), an individual must be employed or seeking employment at the time of the alleged act of disability discrimination.

As a brief factual overview, Karyn Stanley worked as a firefighter starting in 1999.  When she was hired, the City of Sanford offered health insurance until age 65 for two categories of retirees: those with 25 years of service and those who retired earlier due to disability. Four years after she began working, the City changed its policy to provide health insurance up to age 65 only for retirees with 25 years of service, and not to individuals who retired early due to disability. Instead, employees who retired early due to disability would receive only 24 months of coverage. Ms. Stanley developed a disability and was forced to retire early; as such, she was only entitled to 24 months of health insurance.

Stanley sued for disability discrimination under the Americans with Disabilities Act (“ADA”), alleging that the City violated the ADA by providing different health insurance benefits to those who retire with 25 years of service and those who retire due to disability.  The U.S. District Court for the Middle District of Florida dismissed Stanley’s ADA claim, reasoning that the alleged discriminatory act took place after she retired, and the U.S. Court of Appeals for the Eleventh Circuit affirmed the lower court’s decision.

In affirming the Eleventh Circuit’s decision, the SCOTUS agreed that, to prevail under the ADA, the employee must be employed or seeking employment at the time of the alleged discrimination.

For further information, please do not hesitate to reach out to Sacks Tierney’s employment law team:

Shar Bahmani – Shar.Bahmani@SacksTierney.com

Katya Norris – Katya.Norris@SacksTierney.com

Evan Hiller – Evan.Hiller@SacksTierney.com