Disparate Effect

What is a “disparate effect?”

A disparate effect happens when a rule, policy, procedure, standard, or any test carried out in an organization has a negative effect on individuals belonging to a protected group. This negative effect is oftentimes discriminatory. The concept of disparate effect has been incorporated in regulations that address discrimination based on race, sex, gender, sexual orientation, religion, age, pregnancy, disability, national origin, equal pay, military status, or genetic information. 

It is important to note that disparate effects are unintentional. Meaning, at first glance, the rule or policy may seem neutral but ultimately exclude a protected class and puts them at a disadvantage. 

How is disparate effect measured? 

Measuring disparate effect is an essential step for companies to see if any of their screening requirements or practices have a disparate effect. 

The U.S. Equal Employment Opportunity Commission (EEOC) developed the “4/5ths” rule (Four-Fifths rule). If the selection rate for a particular group is less than 80% or four-fifths of the selection rate for the highest group, then there means that there is a disparate effect. 

Why is it important for organizations to measure disparate effect?

A disparate effect can happen at any part of the employment process. From hiring, interviewing, onboarding, promotion, performance reviews, to layoffs, there is a possibility that even one line or rule results in disparate effects. When it comes to disparate effects, it is black and white. There is no “minimal disparate effect” or “grave disparate effect.” It either exists or it does not.

If even one step in the screening process is disproportionate, it will hurt the company as a whole. Not only can the organization be subject to lawsuits and legal damages, but the company is also excluding potential talent and contributors. Evaluating the screening process, policies, and practices of an organization is key to having an inclusive workforce. 

How can HR help in preventing disparate effect? 

The HR team must take the initiative in making sure that an organization remains free from disparate effect and compliant with EEOC guidelines. This entails reviewing policies, manuals, hiring processes, and other systems implemented by the company. Aside from this, the HR team can also create employee awareness of disparate effects and its consequences.