What This Means for Your Business
New Jersey has new rules about disparate impact discrimination. These rules clarify that some business policies can be illegal even when they don't mention protected characteristics such as race, religion, or disability.
These rules are complex. If you're not sure whether your policies follow the law, talk to an employment lawyer or civil rights lawyer who knows New Jersey law.
This guide gives general information. It is not legal advice. The New Jersey Innovation Authority created this resource to help businesses understand their obligations under new state regulations.
Why are these rules needed? Because some policies hurt certain groups more than others. Even if you didn't mean to cause harm, the policy can still break the law.
What you need to do: Make sure your business policies are necessary. And make sure there's no other way to do things that causes less harm.
What Is Disparate Impact Discrimination?
Some business rules don't mention protected characteristics such as race, religion, or disability. They seem fair. But they still hurt some groups more than others. That's disparate impact discrimination.
Example: A housing provider rejects all applicants with credit scores below 600. This rule doesn't mention race. But it blocks more Black and Hispanic applicants than white applicants. Why? Because Black and Hispanic people have historically had less access to credit. The rule causes unequal harm.
Key point: Your intention doesn't matter. Even if you meant no harm, a rule that hurts one group more than others can still break the law.
The Three-Question Test
When someone challenges your policy, regulators and courts ask three questions:
Question 1: Does the policy hurt one protected group more than others?
Can someone prove that your policy harms people in a protected group more than others?
Protected groups include people based on:
- Race
- Religion
- Gender
- Disability
- National origin
- Age (for employment)
- And other characteristics
If NO: No problem.
If YES: Move to Question 2.
Question 2: Do you need this policy for your business?
Can you prove the policy is necessary for an important, real, non-discriminatory business interest? You must show the policy actually works.
If NO: You broke the law. You're liable.
If YES: Move to Question 3.
Question 3: Is there a better way to do this?
Could you achieve the same business interest with a different policy that causes less harm?
Who has to prove this depends on your business:
- Housing providers and lenders: YOU must prove there's no better way
- Employers, restaurants, contractors: The person challenging your policy must prove there is a better way
If there's a better way that causes less harm: You broke the law. You're liable.
If there's no better way: You're okay.
What to Review Now
FOR EMPLOYERS
Review these policies immediately:
Criminal history screening
❌ Problem: Rejecting anyone with any criminal record automatically
✅ Better way: Look at each person separately. Consider:
- What was the crime?
- How serious was it?
- How long ago did it happen?
- Does it relate to this job?
- Has the person changed since then?
- How old was the person when it happened?
Language requirements
❌ Problem: Making employees speak only English during breaks or lunch
✅ Better way: Only require English when the job needs it. Let employees use any language during breaks and casual talk.
AI and automated hiring tools
❌ Problem: Using computer programs that weren't tested on different kinds of people
✅ Better way: Make sure your tools work fairly for all groups. Let people request accommodations and talk with them to find a solution.
Learn more about the guidelines for using AI and other software.
Dress and appearance rules
❌ Problem: Saying no one can wear head coverings or certain hairstyles
✅ Better way: Let people request religious accommodations. Talk with them to find a solution.
Physical requirements
❌ Problem: Requiring everyone to lift 50 pounds when the job doesn't need it
✅ Better way: Only require what the job actually needs. Prove why it's necessary.
Driver's license requirements
❌ Problem: Requiring a license when the person doesn't need to drive
✅ Better way: Only require a license when driving is part of the job.
FOR HOUSING PROVIDERS
Review these policies immediately:
Credit score requirements
❌ Problem: Automatically rejecting anyone with a credit score below 600 or no credit score
✅ Better way: Look at each person separately. Consider:
- Why is their credit low? Is it related to paying rent?
- How long ago were the problems?
- How much rent will they pay themselves vs. government assistance?
- Have they improved their credit?
- Do they have a job? Did they pay past rent on time?
Criminal history screening
❌ Problem: Rejecting anyone with any conviction
❌ Never allowed: Rejecting people for arrests that didn't result in conviction, erased records, or juvenile records
✅ Better way: Look at each person separately. Consider:
- What was the crime?
- How serious was it?
- How long ago?
- Does it affect tenant or property safety?
- Did it happen at a rental property?
- Has the person changed?
Income requirements
❌ Problem: Requiring income to be 3x rent without counting government help
✅ Better way: Only count the rent portion the tenant pays themselves. Don't count the government assistance portion.
Religious accommodations
❌ Problem: Only providing an electronic method, such as an electronic gate, for tenants to access a residential community; prohibiting tenants from displaying items on their apartment doors
✅ Better way: Allow requests for reasonable accommodations based on religious observances, practices, or beliefs and either grant the requests or work with them to find a solution. Such accommodations may include other ways to enter a residence for Jewish residents who do not use electricity while observing their Sabbath or allowing tenants to put religious items, such as crucifixes, on their doors.
FOR PUBLIC ACCOMMODATIONS (Including Schools)
Review these policies immediately:
Religious clothing and items
❌ Problem: Not allowing head coverings or the carrying of any item that could be viewed as a weapon, without exceptions
✅ Better way: Let people request accommodations to wear religious clothing and carry religious items, such as a kirpan. Work with them to find a solution.
Student discipline (for schools)
❌ Problem: Suspending or expelling students for minor issues that are open to interpretation, such as “disrespect’ or “misbehavior”
✅ Better way: Use a discipline policy that only allows suspension or expulsion when State law requires it. Address minor violations of rules with corrections that provide restorative justice.
Learn More [printable poster, PDF]
Language policies
❌ Problem: Only sending notices to parents in English; not letting students speak their language
✅ Better way: Send notices in languages parents speak at home. Allow students to speak their preferred language when a specific language is not required to communicate with others.
FOR CONTRACTORS
Review these practices immediately:
Who you accept bids from
❌ Problem: Not accepting bids from people in areas where mostly minority residents live
✅ Better way: Use selection criteria related to the job. Don't exclude entire groups.
How you find subcontractors
❌ Problem: Only asking your mostly-white network for recommendations
✅ Better way: Advertise widely so different people can apply.
FOR LENDERS
Review these practices immediately:
Loan approval
❌ Problem: Requiring a minimum credit score without looking at the person's situation
✅ Better way: Look at each person's ability to repay, not just their score
Exception: Federal loan rules (like FHA requirements) are still allowed
Key Concepts Explained
What counts as a "necessary business interest"?
Important: A core need directly related to your business
Real: A genuine reason (not fake or an excuse)
Non-discriminatory: The reason itself doesn't discriminate
For jobs: This means "related to the job and needed for the business"
Examples:
✅ Good reasons: Collecting rent on time (housing); keeping employees safe (employment)
❌ Not good enough: Customers prefer it; it's easier for you
What evidence do you need?
You need real data—not guesses.
Good evidence:
- Numbers showing who you hired by race, gender, etc.
- Population data
- Statistics
- Application files
- National, state, or local data
Not enough by itself (but can help):
- Stories ("I know someone who...")
- "What if" scenarios
What if you use outside companies or computer programs to make decisions?
You're responsible for what they do. If you use AI hiring tools, credit check companies, or other services, you must make sure their use doesn't cause disparate impact.
Common Examples and Solutions
Example 1: Employer with English-Only Rule
Your rule: "All employees must speak only English while at work"
The problem: This hurts employees who speak other languages more. Language is often tied to national origin, ancestry, nationality, race, and religion.
The solution:
- Only require English when the job needs it
- Let employees use any language during breaks, lunch, and casual talk
- Tell employees clearly when they must use English and what happens if they don't
Learn more about language discrimination.
Example 2: Housing Provider with Credit Score Cutoff
Your rule: "We reject anyone with a credit score below 600"
The problem: This blocks more Black and Hispanic applicants because they've had less access to credit historically
The solution:
- Look at each applicant separately
- Ask: Why is the credit score low? How long ago? Have things improved? Do they have a job? Did they pay past rent on time?
- For applicants using rental assistance, only look at the part they pay themselves
Example 3: Restaurant with No-Hat Policy
Your rule: "No hats or head coverings in our dining room"
The problem: This stops people who wear religious head coverings (yarmulkes, hijabs, turbans)
The solution:
- Say in your policy that you allow religious accommodations
- Talk with the person to find a solution
- Example: "Head coverings not allowed except for religious, medical, or disability reasons"
Example 4: Employer Using AI Hiring Tool
Your rule: Using computer software that reads faces during video interviews to judge personality
The problem: If the tool was only tested on white people without disabilities, it might not read faces correctly for people with darker skin or people with disabilities
The solution:
- Make sure the tool was tested on all kinds of people
- Check that it doesn't screen out certain groups
- Let people know you’ll be using the tool, allow them to request accommodations, and work with them to find a solution
- Ask: Do we really need this tool to make hiring decisions?
What to Do Right Now
Within the next 30 days:
- Make a list of your policies
- Write down all rules that could affect different groups differently
- Include: how you hire, screen tenants, check credit, dress codes, language rules, discipline
- Check each policy
- Does this hurt one group more than others?
- Do we need this for our business?
- Is there a less harmful way to do this?
- Write down your review
- Keep records of what you looked at and why you chose your current rules
- You'll need this if someone challenges your policy
- Update your policies
- Add language like: "We will consider requests for accommodations based on religion, disability, or other protected characteristics"
- Train your staff
- Make sure everyone who hires, screens tenants, or enforces policies understands these rules
- Keep records of training
- Check your vendors
- If you use screening companies, AI tools, or other services, make sure they follow these rules
What Happens If You Break These Rules?
People can file complaints with the Division on Civil Rights or go to court. If you're found liable, you could face:
- Orders to change your policies
- Money damages
- Paying the other side's lawyer fees
- Court orders to stop doing something
These rules don't create new requirements—they explain existing laws. But now enforcement will be clearer and more consistent.
Key Takeaways
✅ Review ALL policies that could affect different groups differently
✅ Look at each person separately instead of using automatic rules
✅ Write down why you chose your current policies
✅ Let people request accommodations for religion, disability, and other protected characteristics and work with them to find a solution
✅ Test artificial intelligence tools, including automated decision-making tools, to make sure they're fair
✅ Train your staff on these rules
❌ Don't say "we didn't mean to discriminate" as your only defense
❌ Don't use "customers prefer it" as your reason
❌ Don't ignore policies just because they don't mention race, religion, disability, or other protected characteristics
Additional Resources
Read the full regulations:
N.J.A.C. 13:16
Download the flowchart on disparate impact discrimination claim analysis.
File a complaint or get more information:
NJ Division on Civil Rights
Website: www.NJCivilRights.gov
Phone: 1-833-653-2748
Email: NJDCR4U@njcivilrights.gov
Legal questions:
These rules are complex. If you're not sure whether your policies follow the law, talk to an employment lawyer or civil rights lawyer who knows New Jersey law.
This guide gives general information. It is not legal advice. The New Jersey Innovation Authority created this resource to help businesses understand their obligations under new state regulations.
Last updated: February 2026
