About Adverse Impact

Adverse impact is defined by the Uniform Guidelines 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 (see Question & Answer #10). Title VII of the Civil Rights Act of 1964 (henceforth referred to as Title VII) prohibits employment discrimination on the basis of race, color, religion, sex, or national origin.  The Equal Employment Opportunity Commission (EEOC) is the federal agency responsible for enforcement of Title VII.  In 1978, the EEOC, along with the former Civil Service Commission (succeeded by the Merit System Protection Board and the United States Office of Personnel Management), the United States Department of Labor, and the United States Department of Justice established the Uniform Guidelines on Employee Selection Procedures and the Uniform Employee Selection Guidelines Interpretation and Clarification (Questions and Answers). These documents are more conveniently referred to as the Uniform Guidelines.  The Uniform Guidelines serve as a set of guidelines to follow for ensuring compliance with Title VII.

The Uniform Guidelines apply to essentially all organizations that employ 15 or more employees (see Question & Answer #3).  If you are an employer that falls into this category, you should ensure that you are familiar with the concept of adverse impact.  Due to a number of complex factors, adverse impact is extremely prevalent in tests or other types of procedures that are used for making employment decisions.  Although the Uniform Guidelines and adverse impact are most frequently discussed with respect to testing and hiring employees, they apply to virtually any employment decision that impacts one's job standing (see Question & Answer #6 and Section 2B).

Adverse impact is generally the first step in establishing prima facie evidence of discrimination under Title VII. The burden is on the plaintiff to show that an employment decision adversely impacted a protected class.  Although Title VII permits claims of discrimination based on race, color, religion, sex, or national origin based on either disparate (adverse) impact or disparate treatment, Title VII does not apply directly to discrimination based on age or disability.  Rather, the Age Discrimination in Employment Act and the Americans with Disabilities Act of 1990 protects those ages 40 years old and above and disabled individuals, respectively.  Historically, the Age Discrimination in Employment Act only permitted claims of age discrimination based on disparate treatment.  However, in Smith v. City of Jackson (544 U.S. 228, 2005) the U.S. Supreme Court allowed for charges of discrimination based on disparate impact. It is likely that adverse impact will play an increasingly important role in age discrimination charges and cases in the future.

The finding of adverse impact is enough to trigger an investigation which could, ultimately, end up being very costly and could also tarnish an organization's reputation. There were over 67,500 discrimination charges filed under Title VII and 19,103 charges of age discrimination in 2007 alone.  Monetary benefits paid out in 2007 included $232,300,000 for Title VII charges and $66,800,000 for age discrimination charges.  (Statistics for the last several years are made available by the EEOC).   It is important to note that not all discrimination charges are disparate impact claims based on adverse impact; the number of disparate impact charges is likely far less than the total number of charges.  However, the monetary benefits do not include benefits obtained through litigation or costs incurred as a result of proceeding through litigation. The monetary impact is likely far greater than the benefits paid!

The finding of adverse impact shifts the burden of proof to the defendant and would require the employing organization to defend the employment decision in question by providing evidence that the process used to make the decision was valid.  According to the Uniform Guidelines (Section 3A), once a plaintiff provides evidence of adverse impact, it is assumed that the defendant's practice was discriminatory unless sufficient validity evidence is provided.

It is important to recognize that adverse impact is not a property of a test; rather, it is an analysis of the results of employment decisions which may be influenced, in part, by a test or any number of other factors (e.g., number of vacancies, seniority, performance ratings, budgetary constraints, etc.).  Adverse impact could result from the use of unfair, biased, discriminatory, or unlawful procedures. However, adverse impact could also result from true differences between two protected groups on a relevant, job-related characteristic. In absence of further information, adverse impact should be regarded as a neutral term.

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