When a seemingly neutral employment practice disproportionately affects a protected group, leading to unintentional discrimination.
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What Is Adverse Impact?
Adverse impact (also known as disparate impact) refers to a seemingly neutral employment policy or practice that unintentionally results in the exclusion or disadvantage of individuals based on protected characteristics such as race, color, religion, sex (including gender identity and sexual orientation), or national origin.
This concept is governed by Title VII of the Civil Rights Act of 1964, which prohibits employers from using selection procedures that disproportionately exclude members of a protected group, unless those procedures are job-related and consistent with business necessity.
Examples of Adverse Impact
- Requiring 4–7 years of experience for a role may exclude older candidates with significantly more experience.
- Implementing physical fitness or agility tests may disproportionately screen out women or individuals with disabilities.
- Conducting background checks selectively, then more rigorously screening certain groups, may lead to discriminatory outcomes.
Consequences of Adverse Impact
Adverse impact can have serious legal, financial, and reputational consequences, including:
- Lawsuits: These can involve multiple employees and long-standing organizational practices, making them attractive for class action attorneys. For example, Target Corporation settled an adverse impact case for $2.8 million.
- Loss of Talent: Biased policies can eliminate strong candidates from the talent pool.
- Ineffective Practices: Time and resources spent on flawed selection tools or assessments can reduce overall hiring efficiency.
How to Prevent Adverse Impact
Employers can proactively reduce the risk of adverse impact by:
- Applying the 4/5ths (80%) Rule: If a protected group’s selection rate is less than 80% of the most selected group’s rate, adverse impact may exist.
- Reviewing and Updating Job Requirements: Ensure all qualifications and assessments are essential to job performance.
- Training Managers and Recruiters: Regular EEO compliance training helps avoid the use of illegal or biased hiring criteria.
- Auditing Hiring and Promotion Data: Conduct periodic adverse impact analyses to detect and correct patterns of disparity.
- Standardizing Hiring Procedures: Use structured interviews and validated assessments consistently across all candidates.
Even unintentional discrimination can result in significant consequences. That’s why understanding and proactively addressing adverse impact is essential for creating fair, inclusive, and legally compliant workplaces.
