Adverse Impact

What is Adverse Impact?

An adverse impact happens when a policy, procedure, practice, or any decision enforced in an organization has a negative consequence or effect on a protected group. 

Adverse impact can occur at any point in the workplace: candidate selection, hiring, onboarding, training, transfer, promotion, and layoff. It is a result of any employment practice and can be unforeseen or unintentional. Oftentimes, it can occur in job requirements, hiring interview questions, or even in performance appraisals. 

Furthermore, the U.S. Equal Employment Opportunity Commission (EEOC) and Uniform Guidelines on Employee Selection Procedures said that adverse impact is "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."

To help prevent systemic discrimination, the EEOC works to identify and address discriminatory practices. They collaborate with various organizations, advocacy groups, federal agencies, and employer groups. 

What are examples of Adverse Impact? 

It is important to remember that adverse impact can oftentimes be unintentional. While a statement or policy can appear to be neutral and harmless, a closer examination can reveal that it can disproportionately alienate or exclude people based on their age, sexuality, ethnicity, gender identity, or national origin.

Examples: 

A company is looking to hire a supervisor. One of the bullets in the job requirements said that work experience should be 2-6 years. 

• At first glance, there seems to be nothing wrong with it. The company probably does not want somebody without experience. However, what about those candidates with more than 6 years of work experience? 
• While some candidates can fall into this category, what about the more mature candidates with, let’s say, 10 years of experience or more? 

A company is looking to hire a warehouse clerk. The company decides to have a physical strength test as part of the hiring process. 

• Is a physical test essentially job-related? 
• What about those who qualify but may not pass the physical test? 

What is the role of HR in avoiding adverse impact? 

HR takes an active role in ensuring that an organization does not make any move that can result in an adverse impact, whether intentional or unintentional. HR professionals must remain alert to review, study, and examine policies, programs, and procedures. From hiring and throughout an employee’s stay in the company, the HR team must uphold and maintain EEOC compliance. Additionally, HR must align with the organization’s managers and leaders. Making them aware of adverse impact and its ramifications is crucial. 

How can organizations avoid adverse impact? 

To help organizations see if a screening is disproportionate, the EEOC developed a “4/5ths” or “80%” Rule. According to them, it is deemed disproportionate if the selection rate for any group is less than four-fifths or 80% of the selection rate for the highest group. 

What are the consequences of adverse impact? 

When there is an adverse impact in an organization, it can lead to charges of discrimination. Legal penalties, damages, and lawsuits will affect an organization tremendously. Aside from the financial consequences, it will harm the organization as a whole and can potentially lose talented people.