Definition
Adverse impact is a substantially different rate of selection in hiring, promotion, or other employment decisions that works to the disadvantage of members of a race, sex, or ethnic group. It can occur even when a practice looks neutral, and employers monitor it by comparing selection rates across groups.
Also known as: disparate impact, adverse impact analysis
How it works
Employers calculate the selection rate for each group, meaning the number selected divided by the number of candidates, at a given step such as a test, interview, or promotion decision. They then compare each group's rate with the rate of the group selected most often.
Federal enforcement agencies use the four-fifths rule as a practical screen: a rate below 80 percent of the highest group's rate is generally regarded as evidence of adverse impact. The Uniform Guidelines add that smaller differences can matter when they are significant in statistical and practical terms, and larger differences may not when numbers are small.
Employers are expected to keep records of selection rates by sex and by race and ethnic group. A finding prompts a closer review of the practice and its job relevance.
Example
A company screens 200 applicants with an online assessment. Sixty percent of one group pass but only 42 percent of another, a ratio of 70 percent, so HR reviews whether the assessment is job related and whether an alternative would reduce the gap.
How it differs from similar terms
Adverse Impact vs Four-Fifths Rule. Adverse impact is the outcome being tested for, while the four-fifths rule is one rule-of-thumb calculation used to flag it.
Related terms and guides
Frequently asked questions
What does adverse impact mean in hiring?
According to the EEOC's Uniform Guidelines Q&A, it is a substantially different rate of selection in hiring, promotion, or other employment decisions that works to the disadvantage of members of a race, sex, or ethnic group. It concerns outcomes of a selection process, not the intent behind it.
What records support an adverse impact analysis?
The EEOC's Uniform Guidelines Q&A says employers should maintain records showing selection rates by sex and by specified race and ethnic groups. These records let employers determine whether any group experiences adverse impact in hiring, promotion, and other employment decisions.
Does adverse impact apply to promotions and tests?
Yes. The Uniform Guidelines refer to hiring, promotion, and other employment decisions, so any selection step, including an assessment or interview, can be examined. Analyzing each stage of the process separately helps an employer identify exactly where a disparity in selection rates enters.