Definition of Disparate Impact:
Disparate impact refers to policies, processes, or systems that are meant to be neutral actually result in a negative outcomes for a protected group. Some examples of protected groups include race, religion, national origin, age, sex, pregnancy, disability, genetics, and veteran status.
In the context of employment, disparate impact occurs when members of a protected group or minority (e.g., a particular race, gender, etc.) receive unfavorable employment decisions (e.g., not being hired) more often than another nonminority group.
Who regulates policies around disparate impact?
The Equal Employment Opportunity Commission (EEOC) prohibits discrimination against these protected classes in employment decisions. The EEOC states that any criteria used to select employees should not discriminate solely on the basis of membership within any of these protected groups.
Employers are responsible for reducing bias when and where they can in their hiring process to ensure their recruitment practices don't discriminate against protected groups.
How is disparate impact different from other types of biased hiring outcomes?
Disparate impact, also known as adverse impact, is a form of indirect and unintentional discrimination whereby certain hiring criteria disproportionately favor certain groups over other groups.
Disparate impact is by definition unintentional. When a protected group is purposefully given fewer opportunities or rejected unfairly, that is known as "disparate treatment." Because disparate impact is not intentional, it can be harder to mitigate its effect on hiring outcomes. Overcoming disparate impact requires hiring professionals to check their internal biases and actively stay as objective as possible during the selection process.
Is disparate impact legal?
The reality is that almost every selection methodology used by employers produces a degree of disparate impact because each disproportionately excludes members of a protected group. Basic selection criteria such as background checks, credit checks, work experience, pre-employment tests, and minimum educational requirements can lead to disparate impact. However, using these criteria in the hiring process is legal as long as it is job-related and consistent with business necessity.