What Is Adverse Impact?

Adverse Impact

Adverse impact, also known as disparate impact, refers to a situation where a seemingly neutral employment policy, practice, or criterion has a disproportionately negative effect on a protected group (e.g., based on race, gender, age, or religion), even though the policy, practice, or criterion is not intended to discriminate.

Identifying Adverse Impact

The "Four-Fifths Rule" or "80% Rule" is commonly used to determine if an adverse impact exists. This rule states that if the selection rate for a protected group is less than 80% of the selection rate for the group with the highest selection rate, there may be evidence of adverse impact.

For example:

If 50% of male applicants are hired, but only 30% of female applicants are hired, the selection rate for females is 60% (30% / 50%) of the male selection rate, indicating a possible adverse impact against women.

Causes of Adverse Impact

1. Unintentional bias in selection criteria

2. Overreliance on subjective assessments

3. Inadequate job analysis or validation of selection tools

4. Lack of diversity in the applicant pool

5. Historical or systemic inequalities in education or access to opportunities

Consequences of Adverse Impact

  • Legal liability: Organizations may face discrimination claims and lawsuits under laws such as Title VII of the Civil Rights Act of 1964.
  • Reputational damage: Allegations of discrimination can harm an organization's public image and employee morale.
  • Homogeneous workforce: Adverse impact can perpetuate a lack of diversity, limiting the benefits of diverse perspectives and experiences.

Mitigating Adverse Impact

1. Conduct thorough job analyses to ensure selection criteria are job-related and consistent with business necessity.

2. Validate selection tools to ensure they predict job performance and do not unfairly disadvantage protected groups.

3. Use multiple, diverse selection methods to assess candidates' qualifications.

4. Train hiring managers and decision-makers on fair and objective evaluation practices.

5. Monitor selection processes regularly for potential adverse impact and make adjustments as needed.

6. Expand recruitment efforts to attract a diverse applicant pool.

7. Consider alternative selection methods that minimize adverse impact while still meeting business needs.