How to Calculate Adverse Impact

Adverse Impact Formula:

\[ \text{Ratio} = \frac{\text{Minority Rate}}{\text{Majority Rate}} \]

Adverse Impact Ratio:

Disparate Impact:

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1. What is Adverse Impact?

Adverse impact refers to the negative effect an unfair or discriminatory practice has on a protected group. It occurs when a selection process appears neutral but disproportionately excludes members of a protected class.

2. How Does the Calculator Work?

The calculator uses the Four-Fifths Rule (80% Rule):

\[ \text{Ratio} = \frac{\text{Minority Selection Rate}}{\text{Majority Selection Rate}} \]

Where:

\( \text{Minority Rate} \) — Selection rate for the minority/protected group (%)
\( \text{Majority Rate} \) — Selection rate for the majority group (%)
\( \text{Ratio} \) — Adverse impact ratio (unitless)

Interpretation: If the ratio is below 80% (0.8), disparate impact exists, suggesting potential discrimination in the selection process.

3. Importance of Adverse Impact Analysis

Details: Adverse impact analysis is crucial for ensuring fair employment practices, complying with equal employment opportunity laws, and identifying potential discrimination in hiring, promotion, or other employment decisions.

4. Using the Calculator

Tips: Enter selection rates as percentages for both minority and majority groups. The calculator will determine if adverse impact exists based on the Four-Fifths Rule.

5. Frequently Asked Questions (FAQ)

Q1: What is the Four-Fifths Rule?
A: The Four-Fifths Rule is a guideline established by the Equal Employment Opportunity Commission (EEOC) that states a selection rate for any protected group that is less than 80% of the rate for the group with the highest rate may indicate adverse impact.

Q2: What constitutes a protected group?
A: Protected groups include race, color, religion, sex, national origin, age (40+), disability, and genetic information under various federal laws.

Q3: Is adverse impact always illegal?
A: Not necessarily. If an employer can demonstrate that the practice is job-related and consistent with business necessity, it may be permissible despite adverse impact.

Q4: What sample size is needed for reliable analysis?
A: Generally, larger sample sizes provide more reliable results. The EEOC suggests statistical significance testing for smaller sample sizes.

Q5: Can adverse impact analysis be used for other purposes?
A: Yes, it can be applied to various employment decisions including promotions, terminations, compensation, and training opportunities.