What is adverse impact?

Adverse impact happens when a hiring, promotion or other employment practice that looks neutral selects people from one group at a substantially lower rate than another. It can be unlawful even without any intent to discriminate.

In shortAdverse impact, also called disparate impact, is a substantially different rate of selection that works to the disadvantage of a group protected by law, such as a race, sex or ethnic group. Under Title VII, a practice that causes a disparate impact is unlawful if the employer cannot show it is job related for the position in question and consistent with business necessity, or if the employer refuses an available alternative practice with less impact. Federal guidelines use a rule of thumb to spot it: a selection rate for any group that is less than four-fifths, or 80%, of the rate for the group with the highest rate will generally be regarded by federal enforcement agencies as evidence of adverse impact. Smaller differences can still count, and larger ones can be explained. Common sources in hourly hiring are physical tests that go beyond the job’s real demands, requirements like a degree for a job that does not need one, and screening rules applied without a link to the work.

The four-fifths rule in practice

Calculating adverse impact
Step	What to do
1	Count applicants and people selected in each group
2	Selection rate = selected / applicants for each group
3	Find the group with the highest selection rate
4	Divide each group’s rate by the highest rate
5	A result under 80% is generally treated as evidence of adverse impact

The rule is a screening tool, not a final answer. If it flags a step, check whether that step really measures what the job needs.

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Matching the test to the job lifted the ratio above the four-fifths line.

Worked example: a lifting test at a distribution center

Selection rates of 30% and 60%

A distribution center requires every applicant to lift 75 pounds. Last quarter, 50 of 100 male applicants and 15 of 50 female applicants were hired. The selection rates are 50% for men and 30% for women. 30% / 50% = 60%, well under 80%.

HR checks the job. Picking involves cases that weigh up to 45 pounds; heavier items are moved with equipment. The 75-pound test screens out people who could do the real job, and it is hard to show it is job related and consistent with business necessity.

The center changes the test to lifting 45 pounds from floor to waist height, matching the actual work. The next quarter, rates are 52% for men and 46% for women. 46% / 52% = about 88%, and the people hired can do the job.

Mistakes that are specific to adverse impact

Assuming a practice is safe because nobody intended to discriminate.
Never counting selection rates by group.
Using physical or education requirements beyond what the job needs.
Treating the four-fifths rule as a safe harbor when numbers are just above it.
Ignoring an alternative practice with less impact that would work as well.

Checking your own hiring steps

List each step in your hiring process: application screen, test, interview, background check.
For each step, count applicants and people who passed, by group, where you collect that data voluntarily.
Calculate the pass rate for each group and compare with the highest rate.
For any step under 80%, check whether it measures what the job really needs.
If it does not, change it; if it does, write down why and look for an alternative with less impact.

Small numbers can swing a lot. With only a few applicants in a group, one hire changes the rate significantly, so look at several months together before drawing conclusions.

Second example: a requirement that was not needed

A cleaning company requires a high school diploma for cleaners. Its check shows a much lower pass rate at the screening step for one group of applicants.

The company asks what the job needs: following written safety instructions and checklists. It replaces the diploma requirement with a 10-minute practical task of reading and following a cleaning checklist. Pass rates even out, and supervisors report no change in new hires’ performance.

Test the job, not the strongest personSet physical tests from what the job actually requires, measured on the floor, not from what the best performer can do. The test becomes fairer and easier to defend.

Questions people ask

What is adverse impact?

A substantially lower selection rate for a protected group caused by a practice that looks neutral, such as a test or requirement.

What is the four-fifths rule?

A guideline: a group’s selection rate below 80% of the highest group’s rate is generally treated as evidence of adverse impact.

Is adverse impact illegal?

It can be. Under Title VII, a practice that causes a disparate impact is unlawful if it is not job related and consistent with business necessity, or if a less discriminatory alternative is refused.

What is the difference between adverse impact and disparate treatment?

Disparate treatment is intentionally treating someone differently because of a protected trait. Adverse impact is about the effect of a neutral practice.

How often should employers check for adverse impact?

At least once a year for each major hiring step, and whenever a new test or requirement is introduced.

Can a job-related test still have adverse impact?

Yes. If it does, the employer should be able to show it is job related and consistent with business necessity, and consider alternatives with less impact.

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Disclaimer: This explanation of adverse impact is general information, not legal, payroll or tax advice; rules differ by state and city and change over time, and the examples are fictional.