Definition of Disparate Impact:
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. Some examples of protected groups include race, religion, national origin, age, sex, pregnancy, disability, genetics, and veteran status.
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.
Disparate impact, also known as adverse impact, is a form of indirect and often unintentional discrimination whereby certain hiring criteria disproportionately favor certain groups over other groups. However, 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.