Adverse impact in selection occurs when a protected group defined by Title VII of the Civil Rights Act of 1964 (Title VII) is hired or promoted at a substantially lower rate than the group with the highest hiring and promotion rates. Title VII applies to organizations with 15 or more employees.
There are different ways to determine if your organization’s selection processes indicate adverse impact. Most commonly, organizations use the four-fifths rule or 80-percent rule. This rule states that the selection rate for a protected group cannot be less than four-fifths (80 percent) of the selection rate for the group with the highest selection rate.
For example, if 10 Caucasian individuals apply and you hire eight and 10 Asian individuals apply and you hire two, the selection rate for Caucasians is 80 percent and the selection rate for Asians is 20 percent. Comparing the two rates, you see that the selection rate for Asians is 25 percent of the rate for Caucasians. Twenty-five percent is less than four-fifths; therefore, adverse impact is indicated. Like the example, if the lowest selection rate is less than four-fifths of the highest selection rate, the selection process is said to have an adverse impact on the protected group. This test has practical significance because it is based on the ratios of selection rates of different groups. Two other methods used to determine adverse impact are Fischer’s Exact Test and Barnard’s Exact Test. These methods are used to determine if there is a relationship between two variables and two levels. Both methods involve statistical analysis and used less common.
If adverse impact is found through one of these methods, the organization must show the selection system is “job related” or a “business necessity.” If organization cannot make this showing, it will have to revise or replace its selection system.
You can take a closer look at the selection processes you are using by comparing the high-scoring group with the low-scoring group and determining which steps in the process or questions are causing the low-scoring group to not do as well. From there, you can adjust the step, re-write the question, or replace the step or question with something more appropriate.