Adverse Impact

Glossary of HR Terms What is Adverse Impact

What is Adverse Impact?

Adverse Impact occurs when a hiring or HR practice disproportionately disadvantages members of a protected group, even if unintentional. It is often measured by comparing selection rates across groups to ensure fairness and compliance with employment laws.

Why it matters

Adverse impact has significant legal, ethical, and reputational implications. Identifying and addressing it helps organizations ensure fair treatment, promote diversity, and avoid lawsuits or regulatory penalties.

How it affects HR

Adverse impact highlights the responsibility HR has in promoting equity and compliance. In recruitment and selection, HR must regularly audit tools such as assessments, interview structures, and sourcing strategies to ensure they do not unintentionally disadvantage protected groups. In promotions and performance evaluations, HR must monitor for systemic disparities that limit advancement opportunities. Addressing adverse impact requires HR to implement validated, bias-resistant practices and to track outcomes through people analytics. By doing so, HR not only ensures compliance with labor laws but also demonstrates a commitment to diversity, equity, and inclusion, strengthening employer brand and employee trust.

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Common use cases/Examples

  • Conducting a four-fifths rule analysis to detect disparities in hiring.
  • Auditing pre-employment assessments for bias.
  • Monitoring promotion rates across demographic groups.
  • Using third-party validation to confirm fairness.
  • Addressing systemic barriers in workforce planning.

FAQ

A guideline stating that a selection rate for a protected group that is less than 80% of the rate for the highest group may indicate adverse impact.

Not necessarily. It is unlawful only if the practice causing it is not job-related and consistent with business necessity.

Through statistical analyses of hiring, promotion, or termination rates across demographic groups

By using validated, unbiased selection tools, structured interviews, and ongoing diversity audits.

The Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP).