- Adverse impact
] . 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.
The 80% rule
The 80% rule defines adverse impact as occurring when the selection rate of the focal group is less than 80% of the selection rate of the reference group. For example, a job opening has 100 applicants, 95 declare their race as white, and 5 applicants declare their race as Asian. If 40 of the declared white applicants are selected, and 1 of the declared Asian, 40/95, or 42% of the white applicants are selected, and 1/5, or 20% of the Asian applicants. The 80% rule states that the selection rate of the focal group should be at least 80% of the selection rate of the reference group, in this example, 42% x 0.8 = 33.6%, larger than the 20% selection rate of Asian applicants. In this example, the 80% rule is not met.
Because the 80% test does not involve probability distributions to determine whether the disparity is a “beyond chance” occurrence, it is typically not regarded as the definitive test for adverse impact. Rather, statistical significance tests are employed for this purpose.
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. [cite book |author=Dan Biddle |title=Adverse Impact And Test Validation: A Practitioner's Guide to Valid And Defensible Employment Testing |publisher=Gower Technical Press |location=Aldershot, Hants, England |year= |pages=2-5 |isbn=0-566-08778-2 |oclc= |doi=]
More advanced testing
Statistical significance tests are more commonly applied in enforcement and litigation settings, and require the use of statistical inference tests such as the
Fisher's exact test(when two groups are being compared), the binomial test(when one group’s representation in the workforce is being compared to their availability in the outside labor pool), or Multiple Event tests (such as the Mantel-Haenszeltechnique when multiple events are analyzed simultaneously). When any statistical test is applied, the results must be statistically significant at the 5% chance level for adverse impact to exist. Because Title VII assumes a neutral position for employers, a two-tailed statistical test is used for determining statistical significance levels.
The concept of practical significance for adverse impact was first introduced by Section 4D of the Uniform Guidelines [citeweb|url = http://www.uniformguidelines.com/uniformguidelines.html#18|title=Adverse impact and the "four-fifths rule."|publisher = uniformguidelines.com|accessdate =
November 14 2007|quote = Smaller differences in selection rate may nevertheless constitute adverse impact, where they are significant in both statistical and practical terms] , 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 F2d 1300, CA-4 1978, 454 F. Supp. 1077); and Waisome v. Port Authority (948 F.2d 1370, 1376, 2d Cir.,1991).
Adverse impact is also known as an unintentional form of discrimination, which 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 success on a job. An important thing to note is that adverse impact is "not" illegal. [cite book |author=Herman Aguinis; Cascio, Wayne F. |title=Applied Psychology in Human Resource Management (6th Edition) |publisher=
Prentice Hall|location=Englewood Cliffs, N.J |year= |pages= |isbn=0-13-148410-9 |oclc= |doi=] Adverse 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" (1964/1991 Civil Rights Act, Section 2000e-2 [k]  [A] ). For example, a fire department requiring applicants to carry a 100 lb (50 kg) pack up three filghts 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.
It is also important to know that Adverse 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.
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