In United States employment law, the doctrine of disparate impact holds that employment practices may be considered discriminatory and illegal if they have a disproportionate "adverse impact" on members of a minority group. Under the doctrine, a violation of Title VII of the 1964 Civil Rights Act may be proven by showing that an employment practice or policy has a disproportionately adverse effect on members of the protected class as compared with non-members of the protected class.
The doctrine prohibits employers "from using a facially neutral employment practice that has an unjustified adverse impact on members of a protected class. A facially neutral employment practice is one that does not appear to be discriminatory on its face; rather it is one that is discriminatory in its application or effect." Where a disparate impact is shown, the plaintiff can prevail without the necessity of showing intentional discrimination unless the defendant employer demonstrates that the practice or policy in question has a demonstrable relationship to the requirements of the job in question. This is the so-called "business necessity" defense.
Disparate impact contrasts with disparate treatment. A disparate impact is unintentional, whereas a disparate treatment is an intentional decision to treat people differently based on their race or other protected characteristics.
While disparate impact is a legal theory of liability under Title VII, adverse impact is one element of that doctrine, which measures the effect an employment practice has on a class protected by Title VII. In the Uniform Guidelines on Employee Selection Procedures, an adverse impact is defined as a "substantially different rate of selection in hiring, promotion, or other employment decision which works to the disadvantage of members of a race, sex, or ethnic group.". A "substantially different" rate is typically defined in government enforcement or Title VII litigation settings using the 80% Rule, statistical significance tests, and/or practical significance tests. Adverse impact is often used interchangeably with "disparate impact," which was a legal term coined in one of the most significant U.S. Supreme Court rulings on disparate or adverse impact: Griggs v. Duke Power Co., 1971. Adverse Impact does not mean that an individual in a majority group is given preference over a minority group. However, having adverse impact does mean that there is the “potential” for discrimination in the hiring process and it could warrant investigation.
The 80% rule
The 80% test was originally framed by a panel of 32 professionals (called the Technical Advisory Committee on Testing, or TACT) assembled by the State of California Fair Employment Practice Commission (FEPC) in 1971, which published the State of California Guidelines on Employee Selection Procedures in October, 1972. This was the first official government document that listed the 80% test in the context of adverse impact, and was later codified in the 1978 Uniform Guidelines on Employee Selection Procedures, a document used by the U.S. Equal Employment Opportunity Commission (EEOC), Department of Labor, and Department of Justice in Title VII enforcement.
Originally, the Uniform Guidelines on Employee Selection Procedures provided a simple "80 percent" rule for determining that a company's selection system was having an "adverse impact" on a minority group. The rule was based on the rates at which job applicants were hired. For example, if XYZ Company hired 50 percent of the men applying for work in a predominantly male occupation while hiring only 20 percent of the female applicants, one could look at the ratio of those two hiring rates to judge whether there might be a discrimination problem. The ratio of 20:50 means that the rate of hiring for female applicants is only 40 percent of the rate of hiring for male applicants. That is, 20 divided by 50 equals 0.40, which is equivalent to 40 percent. Clearly, 40 percent is well below the 80 percent that was arbitrarily set as an acceptable difference in hiring rates. Therefore, in this example, XYZ Company could have been called upon to prove that there was a legitimate reason for hiring men at a rate so much higher than the rate of hiring women. Since the 1980s, courts in the U.S. have questioned the arbitrary nature of the 80 percent rule, making the rule less important than it was when the Uniform Guidelines were first published. A recent memorandum from the U.S. Equal Employment Opportunities Commission suggests that a more defensible standard would be based on comparing a company's hiring rate of a particular group with the rate that would occur if the company simply selected people at random. In other words, if a company's selection system made it statistically more difficult than pure chance for a member of a certain group, such as women or African-Americans, to get a job, then this could be reasonably viewed as evidence that the selection system was systematically screening out members of that social group.
More advanced testing
The concept of practical significance for adverse impact was first introduced by Section 4D of the Uniform Guidelines, which states "Smaller differences in selection rate may nevertheless constitute adverse impact, where they are significant in both statistical and practical terms …" Several federal court cases have applied practical significance tests to adverse impact analyses to assess the "practicality" or "stability" of the results. This is typically done by evaluating the change to the statistical significance tests after hypothetically changing focal group members selection status from "failing" to "passing" (see for example, Contreras v. City of Los Angeles (656 F.2d 1267, 9th Cir. 1981); U.S. v. Commonwealth of Virginia (569 F.2d 1300, 4th Cir. 1978); and Waisome v. Port Authority (948 F.2d 1370, 1376, 2d Cir. 1991)).
This form of discrimination occurs where an employer does not intend to discriminate; to the contrary, it occurs when identical standards or procedures are applied to everyone, despite the fact that they lead to a substantial difference in employment outcomes for the members of a particular group and they are unrelated to successful job performance. An important thing to note is that disparate impact is not, in and of itself, illegal. This is because disparate impact only becomes illegal if the employer cannot justify the employment practice causing the adverse impact as a "job related for the position in question and consistent with business necessity" (called the "business necessity defense").
For example, a fire department requiring applicants to carry a 100 lb (50 kg) pack up three flights of stairs. The upper-body strength required typically has an adverse impact on women. The fire department would have to show that this requirement is job-related for the position. This typically requires employers to conduct validation studies that address both the Uniform Guidelines and professional standards.
Disparate impact is not the same as disparate treatment. Disparate treatment refers to the "intentional" discrimination of certain people groups during the hiring, promoting or placement process.
The Fair Housing Act
The disparate impact theory has application also in the housing context under Title VIII of the Civil Rights Act of 1968, also known as The Fair Housing Act,. The ten federal appellate courts that have addressed the issue have all determined that one may establish a Fair Housing Act violation through the disparate impact theory of liability. The U.S. Department of Housing and Urban Development's Office of Fair Housing and Equal Opportunity, the federal government which administers the Fair Housing Act, issued a proposed regulation on November 16, 2011 setting forth how HUD applies disparate impact in Fair Housing Act cases. On February 8, 2013, HUD issued its Final Rule .
- EEOC v. Sambo's of Georgia, Inc., 530 F. Supp. 86, 92 (N.D. Ga. 1981)
- The Free Dictionary
- E.g. Griggs v. Duke Power Co., 401 U.S. 424, 91 S. Ct. 849, 28 L. Ed. 2d 158 (1977)
- "Uniform guidelines on employee selection procedures". uniformguidelines.com. Retrieved November 14, 2007. "Adverse impact. ”A substantially different rate of selection in hiring, promotion, or other employment decision which works to the disadvantage of members of a race, sex, or ethnic group. See section 4 of these guidelines."
- Lawrence Ph.D., Amie (May 31, 2011). "The Big AI". Select International, Inc.. Retrieved May 31st, 2011.
- Dan Biddle. Adverse Impact And Test Validation: A Practitioner's Guide to Valid And Defensible Employment Testing. Aldershot, Hants, England: Gower Technical Press. pp. 2–5. ISBN 0-566-08778-2.
- "Adverse impact and the "four-fifths rule."". uniformguidelines.com. Retrieved November 14, 2007. "Smaller differences in selection rate may nevertheless constitute adverse impact, where they are significant in both statistical and practical terms"
- Herman Aguinis; Cascio, Wayne F. Applied Psychology in Human Resource Management (6th Edition). Englewood Cliffs, N.J: Prentice Hall. ISBN 0-13-148410-9.
- 1964/1991 Civil Rights Act, Section 2000e-2[k]  [A]