Adverse Impact: What your Hiring Team Needs to Know

adverse-impact

Key Points:

  • Adverse impact is the negative result that unfair and biased selection processes have on protected groups.
  • It is important to measure the potential for impact throughout each step of your hiring or selection process. 
  • Adverse impact can occur in not only the hiring process, but promotion selection, training, transfers, and layoffs as well.

What is Adverse Impact?

It refers to the negative consequences that come from an unfair employment or promotion selection based on unintentional bias.

Examples of Adverse Impact

  • Background screenings for a specific group of candidates but not another
  • An intelligence test required for one group and not another 
  • Fitness or strength requirements unrelated to the job description to filter out women or disabled persons

Background

Adverse impact stems from a landmark case in 1971, Griggs V Duke Power Co. In this case, Willie Griggs and 12 coworkers sued their employer, alleging that the general intelligence test used as a screening tool unfairly impacted applicants of color. The Supreme Court ruled that if pre-employment tests had an adverse impact on protected groups, the organization requiring the test must prove that the test is reasonably related to the skills and requirements needed for the job position.

According to Title 7 of the Civil Rights Act of 1964, discrimination in employment is prohibited based on characteristics protected by law. Protected groups include race, sex, religion, national origin, ages 40 and over, disability status, and veteran status, among others. 

The Four-Fifths Rule

The four-fifths rule, or 80% rule, is a guideline that is generally accepted by the Equal Employment Opportunity Commission (EEOC) for making a case for adverse impact. To determine whether adverse impact is indicated in a hiring, promotion, or termination situation, the selection rate for all groups are compared through ratio. If the selection rate of the minority group is not at least four-fifths or 80% of the selected majority, adverse impact is indicated. 

How to Measure Adverse Impact 

It is necessary to measure at every selection step of the hiring process, as it will identify discriminatory practices, ultimately making it fair for every applicant. Even a single biased suggestion in one step of the hiring process will negatively impact an organization’s ability to build an inclusive environment. 

The way to measure it is done by a very simple equation dividing ratios between a highly represented group and a lower represented group. 

 

Total Applicants

Selected Applicants

Equation

Result

Minority/Majority

Adverse impact?

Majority group

100

75

75/100

0.75


0.25/0.75=


Yes; The impact is less than 80%

Minority group

60 

15

15/60

0.25

0.33 (33%)

 

 

After measuring the selection rates, observe whether any group has a selection rate that is substantially lower than the right of the highest selected group. If it is less than 80%, adverse impact is, in most cases, indicated. 

For example:

 

Total Applicants

Selected Applicants

Equation

Result

Minority/Majority

Adverse Impact?

Caucasian   

98

50

50/98

0.51

0.26/0.51=

Yes; The impact is less than 80%

Latino

74

20

20/75

0.26

0.50 (50%)

 

 

Why and How to Avoid Adverse Impact

Unintentional impact is not illegal, but it has the power to limit an organization’s ability to hire great talent by ruining employer reputation. Besides improving the work environment and creating a more productive and successful workplace, a diverse team saves employers from the risk of facing discrimination lawsuits down the road.

There are multiple ways to stay away from this threat:

  • Structured interview questions
  • Same interview questions for every applicant
  • Understanding the four-fifths rule
  • Same interview scoring method for all applicants
  • Understood promotion policy with neutral selection criteria

Conclusion

Recruiting and hiring is an important part of any organization. You want the best foot forward when trying to create the perfect team for your business. Avoiding biased hiring decisions is an important step in improving hiring processes and ensuring the best workplace in the long run. For more on recruiting, hiring, and every other part of the employee lifecycle, visit the SentricHR blog!

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The Sentric Team

The Sentric Team

At Sentric, we help businesses make people management easier with industry-leading technology and standout support.

Sentric HR & Payroll Insights

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