Understanding Disparate Impact Definition and Its Implications

Disparate impact is a concept that can have significant implications in various areas of life.

It refers to the unintentional discrimination that can occur when a policy or practice appears neutral but has a disproportionate effect on a particular group.

For instance, a seemingly neutral policy that affects a group in a disproportionate way can be considered disparate impact.

This can happen in various settings, such as housing, employment, and education.

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Disparate impact refers to policies, processes, or systems that appear neutral but have a disproportionately adverse effect on members of a protected group. Disparate impact is a form of discrimination prohibited by law.

Protected groups include race, religion, national origin, age, sex, pregnancy, disability, genetics, and veteran status. These groups are protected under various laws, including the Civil Rights Act and the Fair Housing Act.

Disparate impact occurs when members of a protected group receive unfavorable employment decisions, such as not being hired, more often than another non-minority group. This can happen even if the policy or practice is intended to be neutral.

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A common example of disparate impact is pre-employment testing. If a test is administered and 50% of white males receive a passing grade, but only 25% of African-Americans pass, this would violate the 4/5 rule. The 4/5 rule states that a policy or practice must not have an adverse impact on a protected group at a rate less than 4/5 (80 percent) of a non-protected group.

Here are some examples of disparate impact:

Disparate impact is unintentional discrimination, and it can happen even if an employer's policies or practices are not intentionally discriminatory.

The Equal Employment Opportunity Commission (EEOC) prohibits discrimination against protected classes in employment decisions, requiring employers to reduce bias in their hiring process.

Employers are responsible for ensuring their recruitment practices don't discriminate against protected groups, as stated by the EEOC.

In 2025, President Trump signed an executive order declaring a policy to eliminate disparate-impact liability in all contexts, ordering federal agencies to deprioritize cases utilizing the disparate impact theory of liability.

However, disparate impact remains a viable theory of liability under the Fair Housing Act in state and federal courts, where regulators and private litigants can still employ the disparate impact theory against facially neutral practices that have a discriminatory effect.

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The Equal Employment Opportunity Commission (EEOC) is responsible for ensuring that employers don't discriminate against protected classes in employment decisions.

Employers are responsible for reducing bias in their hiring process to avoid discriminating against protected groups. They should use criteria that don't solely rely on membership within protected groups.

The EEOC prohibits discrimination against protected classes in employment decisions. This means employers must ensure their recruitment practices don't discriminate against these groups.

In April 2025, President Trump signed an executive order declaring that the policy of the United States is to eliminate disparate-impact liability in all contexts to the maximum degree possible.

Despite this executive order, disparate impact remains a viable theory of liability under the Fair Housing Act in state and federal courts.

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Disparate impact is a serious issue that can occur even when there's no intentional discrimination. It's a result of practices or policies that may not be discriminatory on the surface but have a disproportionate effect on members of a protected class.

Almost every selection methodology used by employers produces some degree of disparate impact, as it disproportionately excludes members of a protected group. Examples include background checks, credit checks, work experience, pre-employment tests, and minimum educational requirements.

The key is whether these criteria are job-related and consistent with business necessity. If they are, then using them in the hiring process is legal. For instance, a policy of terminating the highest paid employees could have a disparate impact on older workers, but if it's based on a legitimate business reason, it's allowed.

In some cases, employers may not even realize they're causing disparate impact. For example, a requirement that workers can lift a certain weight may eliminate women and disabled people from certain jobs, even if it's not the intention. The FEHA, California's Fair Employment and Housing Act, offers better protections and remedies for victims of disparate impact than federal laws do.

Here are some examples of disparate impact:

It's essential to examine policies and practices to ensure they don't have a disparate impact, even if they're well-intentioned or neutral. This can be done by looking at the numbers and making changes where necessary.

Disparate impact is a form of indirect and unintentional discrimination that can occur in the hiring process.

Disparate impact is different from disparate treatment, which is intentional discrimination against a protected group.

Disparate impact is unintentional and can be harder to mitigate, requiring hiring professionals to check their internal biases and stay objective during the selection process.

The protected classes in the U.S. include nine categories of workers and applicants, which are:

These protected classes are protected from discrimination and harassment in the workplace based on their status as individuals or groups.

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In the United States, there are nine main protected classes under Title VII. These classes are protected from discrimination and harassment in the workplace based on their status as individuals or groups.

Here are the nine main protected classes:

Some states and local governments have additional protected classes, so it's a good idea to check with your local Department of Labor to learn about any specific protections where you do business.

The Equal Employment Opportunity Commission (EEOC) regulates policies around disparate impact, which occurs when company policies or procedures disadvantage one or more people in one of these protected groups.

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Disparate impact is a unique form of biased hiring outcomes that can be harder to mitigate than other types of discrimination.

It's unintentional, meaning it's not a deliberate attempt to discriminate against certain groups. This makes it more challenging to address than disparate treatment, which is a purposeful form of discrimination.

Disparate impact can arise from internal biases and a lack of objectivity during the selection process. Hiring professionals need to actively work to check their biases and stay objective to avoid this type of discrimination.

Disparate impact can occur when certain hiring criteria disproportionately favor certain groups over others, even if it's not intentional. This can happen during the recruitment and screening process, interviews, and selection, as well as throughout the employment relationship.

Here are the main protected classes in the US, as defined by Title VII:

These protected classes are crucial to understanding disparate impact and how it can occur in the hiring process.

Subjective criteria can be just as revealing as test scores when it comes to disparate impact. Organizations can measure this by looking at the ratio of hires, promotions, and terminations based on the number of applications or resumes received.

The numbers often speak for themselves, and metrics like promotion rates, disciplinary action, and performance evaluations can outline disparate impact.

Negative or positive performance evaluations can also indicate disparate impact, so it's essential to measure these metrics carefully.

Use the 4/5 rule to assess these metrics and ensure no disparate impact.

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Like Me Bias is a common phenomenon in hiring and promoting, where recruiters and hiring authorities tend to favor people with whom they find commonalities or similarities. This bias can be based on factors like shared alma maters, hobbies, or even physical appearance.

Recruiters might gravitate toward people who "look like me" or "sound like me", often unconsciously. This bias can be deliberate or unintentional, but it's a significant issue in employment discrimination cases.

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In some cases, Like Me Bias can be linked to protected classes like gender or race, but it's not always the case. This bias can affect anyone, regardless of their background.

To illustrate this point, consider a scenario where a recruiter favors a candidate who attended the same school as them, simply because of their shared alma mater. This might not be based on a protected class, but it's still a form of bias that can impact hiring decisions.

Here are some examples of how Like Me Bias can manifest in the hiring process:

Disparate impact can occur in various ways, including pre-employment testing or testing requirements for advancement in a company.

The Equal Employment Opportunity Commission (EEOC) created Uniform Guidelines on Employee Selection Criteria to determine whether scored tests adversely impact candidates. This is commonly known as the 4/5 or 80% rule.

To measure disparate impact, organizations can use scored tests or assess and analyze results to determine if they are having a disproportionate impact on protected classes. The 4/5 rule finds an adverse impact if members of a protected class are selected at a rate less than 4/5 (80 percent) of a non-protected group.

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Disparate impact can occur in several ways, including pre-employment testing or testing requirements for advancement in the company. These tests may be problematic if they skew in favor of non-protected applicants.

Organizations use scored tests, often included with screening software, to assess general knowledge. However, these tests can have a disparate impact if they favor one group over another.

Assessing and analyzing results can uncover disparate impact. This involves looking at the outcomes of employment practices to determine if they are having a disproportionate impact on protected classes.

You can measure disparate impact by looking at the data and outcomes of these practices. This can help identify if there are any disparities that need to be addressed.

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The 4/5 rule is a guideline created by the EEOC to measure whether testing or other practices create disparate impact. It's also known as the 80% rule, and it helps businesses determine if their policies or practices give favor or advantage to non-protected classes of workers.

The rule states that an adverse impact is found if members of a protected class are selected at a rate less than 4/5 (80 percent) of a non-protected group. This means that if 50% of white males pass a test, but only 25% of African-Americans pass, it would be a violation of the 4/5 rule.

The 4/5 rule is based on the number of applicants, not transfers, which is an important distinction. For example, if a company promotes 10 men and 10 women from a pool of 50 men and 100 women, it may seem like there's no disparate impact, but in reality, women were advanced at half the rate of men, or 50%, far below the 80% or 4/5 cutoff.

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Disparate impact can affect employment and testing in various ways. For instance, traditional height requirements for police and fire departments have been eliminated, removing the disparate impact they caused.

Physical and mental fitness tests may adversely impact persons with disabilities, who may be able to perform the primary functions of a position with or without accommodation. These individuals may be excluded at a higher than allowable rate due to testing requirements.

Cognitive tests, such as those assessing memory, perceptual speed, and reaction times, may also have disparate impact. More senior applicants and employees may be adversely affected by these tests based on completion results.

English proficiency tests may discriminate against non-native-born Americans if the job does not require high-level language skills. For example, editing or proofreading may require such skills, but other positions may not.

Employers must be aware of these potential disparities and take steps to mitigate them. By doing so, they can create a more inclusive and equitable hiring process.

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Protected Groups are specific demographic groups that are protected from discrimination by federal laws, such as race, color, religion, sex, national origin, age, disability, and genetic information.

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Intentional Discrimination refers to discriminatory actions or policies that are deliberately designed to treat individuals or groups differently based on their protected characteristics.

Adverse Impact occurs when there is a substantially different rate of selection in hiring, promotion, or other employment decisions that works to the disadvantage of members of a protected group.

The 4/5 rule, also known as the 80% rule, is used to determine whether testing or other practices create disparate impact. It finds an adverse impact if members of a protected class are selected at a rate less than 4/5 (80 percent) of a non-protected group.

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The Supreme Court's 2015 decision in Texas Dept. of Housing & Community Affairs v. Inclusive Communities Project, Inc. was a landmark ruling that affirmed four decades of jurisprudence recognizing the role of disparate-impact doctrine in achieving the goals of the Fair Housing Act.

NAR supports a housing market free from discrimination, including illegal disparate-impact discrimination, to achieve more fair, open, and diverse housing markets and communities.

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NAR opposes policies and practices that have a disproportionately adverse effect on a demographic group unless they are justified by a legitimate business necessity and there is no less-discriminatory alternative.

The Supreme Court's 2015 Inclusive Communities decision defined disparate-impact discrimination, which NAR believes helps protect both the fair housing rights of consumers and legitimate business interests of real estate professionals.

NAR believes that eliminating disparate-impact discrimination is crucial to protecting the fair housing rights of consumers and legitimate business interests of real estate professionals.

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