Adverse impact is the negative and discriminatory effect on a minority group that can occur during seemingly unbiased selection procedures. Similar to unconscious bias, it can result in fewer qualified minorities being hired, promoted, or considered for other employment opportunities based on discriminatory reasons.
The difference is that this impact is a legal requirement for US employers with 15 or more employees (20 employees for age discrimination cases) to remain compliant with their recruiting.
Here’s everything you need to know to avoid adverse impact during your talent acquisition process.
Disclaimer: This guide does not replace legal counsel nor your own due diligence.
The U.S. Equal Employment Opportunity Commission defines adverse impact in hiring as:
An example of adverse impact are background checks for a certain group of candidates, but not another. An employer may have what they believe is a logical reason for checking the backgrounds of applicants from Group A and not Group B.
However, this action can result in adverse impact discrimination if more qualified candidates of group A are eliminated due to this background check, and more candidates from group B are hired.
The EEOC Guidelines state that adverse impact is calculated by applying the Four-Fifths Rule or 80% rule:
Adverse impact can work to the disadvantage of members of race, sex, or ethnic group.
An example of the Four-Fifths Rule is if 100 men and 100 women apply for a role, The ratio must be within 80% of each other. This applies to every stage of the hiring process, which means the candidates that you move forward with should be proportional to the previous stage.
How can your team avoid this type of discrimination when recruiting? The first step is to understand which federal laws and regulations affect your organization.
One of the most important organizations for U.S. employers is the Equal Employment Opportunity Commission (EEOC). The EEOC oversees adverse impact cases as well as the federal government’s equal employment opportunity program.
The U.S. Equal Employment Opportunity Commission (EEOC) is “responsible for enforcing federal laws that make it illegal to discriminate against a job applicant” because of:
Most employers with at least 15 employees fall under the jurisdiction of the EEOC. For age discrimination cases, the company must have at least 20 employees.
Employers with 100 or more employees, and federal contractors or subcontractors with 50 or more employees and a contract of at least $50,000, need to submit an annual Employer Information Report EEO-1: a survey of employee data by race/ethnicity, gender, and job category.
As part of the Department of Labor, the goal of the Office of Federal Contract Compliance Programs (OFCCP), is to “protect workers, promote diversity, and enforce the law” among companies that do business with the federal government.
The OFCCP enforces compliance with the legal requirement to take affirmative action and recruit:
The goal of affirmative action is that an employer’s workforce will reflect the gender, racial, and ethnic profile of the labor pools from which the employer recruits and hires.
The OFCCP also forbids hiring discrimination on the basis of:
Employers that fall under the OFCCP include:
All organizations that operate in Canada in an industry that’s regulated by the federal government need to understand the Canadian Human Rights Commission (CHRC).
In Canada, adverse impact would fall under hiring discrimination. The CHRC defines discrimination as “an action or a decision that results in the unfair or negative treatment of a person or group, for reasons such as their race, age or disability.”
Under the Canadian Human Rights Act, an employer cannot discriminate based on:
Employers that fall under the domain of the CHRC for discrimination are:
Similar to affirmative action, the CHRC also enforces employment equity which is a program that “requires employers take actions to ensure the full representation of members of the four designated groups within their organizations” and ensures no person in the four designated groups “shall be denied employment opportunities or benefits for reasons unrelated to ability.”
The four designated groups are:
Employment equity practices include:
Employers that fall under employment equity requirements include:
Similar to the EEO-1, reporting requirements states every private-sector employer that falls under employment equity needs to file an annual report on their employees including data on:
If your organization collects demographic data on the race, sex, and ethnic group of your applicants, talent intelligence technology like Ideal ignores these demographics during screening and then reintroduces this information to measure for adverse impact based on the Four-Fifths Rule.
Your organization is required to collect demographic data on the race, gender, disability status, and veteran status of your applicants. Ideal can analyze data for these groups and reduce any identified bias to remain OFCCP-compliant, all within your ATS.
If your organization collects demographic data on the four designated groups of women, aboriginal peoples, persons with disabilities, and members of visible minorities, Ideal collects self-reported data and assesses for any identified bias across intersecting people groups
Take an active role in preventing adverse impact in the workplace, no matter the company size.
The laws and regulations for talent acquisition are based on your company’s size in most cases.
Note: The regulations listed below pertain only to recruiting and hiring and does not cover all laws and regulations for HR.
The FLSA is a federal law that establishes minimum wage and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments.
Exemptions from minimum wage exist for employees employed as bona fide executive, administrative, professional, computer, and outside sales employees.
This law requires you to only hire people who are legally eligible to work in the U.S. and mandates the use of Form I-9 for verifying the employment eligibility of your hires.
The EPA prevents pay discrimination by requiring equal pay for men and women for equal work in jobs which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except when pay is based on:
The USERRA mandates returning service-members are reemployed in the job that they would have attained had they not been absent for military service, with the same seniority, status, pay, rights and benefits.
It also requires that reasonable efforts (such as training or retraining) be made to enable returning service members to refresh or upgrade their skills to help them qualify for reemployment.
The EPPA prohibits most private employers from using lie detector tests (e.g., a polygraph) during pre-employment screening.
15 employees is when the EEOC starts to regulate whether adverse impact is occurring at your company.
The EEOC enforces Title VII, which makes it illegal to fail or refuse to hire any individual because of his or her race, color, religion, sex, or national origin.
The ADA prohibits discrimination against people with disabilities during recruiting and hiring and covers employers’ obligation to provide reasonable accommodations to qualified job applicants with disabilities (e.g., making materials available in Braille or large print, providing screen reader software).
The EEOC enforces Title II of GINA, which makes it unlawful to discriminate against applicants because of genetic information (e.g., an individual’s genetic tests, family medical history).
The EEOC states, “An employer may never use genetic information to make an employment decision because genetic information is not relevant to an individual’s current ability to work.”
The ADEA forbids an employer from failing or refusing to hire a person or otherwise discriminating against people aged 40 and older during hiring.
For federal contractors and subcontractors, employers must follow an affirmative action program to recruit:
According to the DOL, “employers with a written affirmative action program must implement them, keep them on file, and update them annually.”
The annual EEO-1 report is a survey of employee data by race/ethnicity, gender, and job category for:
Be sure to bookmark this page as a resource for measuring and being aware of adverse impact during talent acquisition!!