Adverse impact is when a neutral looking hiring step selects people from a protected group at a much lower rate than others. It can be unlawful even when nobody intended to discriminate. It is also called disparate impact, and it applies to tests, screening rules, interviews and AI tools alike.
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When a neutral looking hiring step selects a protected group at a much lower rate than others. It can be unlawful even without intent.
The usual first check is the four fifths rule from the US federal Uniform Guidelines on Employee Selection Procedures. Work out the selection rate for each group at a hiring step, meaning the number selected divided by the number who applied or reached that step. If any group's rate is less than four fifths, or 80 percent, of the highest group's rate, federal agencies generally treat that as evidence of adverse impact.
The rule is a rule of thumb, not a final test. Small numbers can produce misleading ratios, so statisticians also use significance tests. Finding adverse impact does not by itself mean a step is illegal. The employer can defend a step that is job related and consistent with business necessity, but it may still be liable if a less discriminatory alternative would serve the same purpose.
Formula: Impact ratio = selection rate of the group ÷ selection rate of the most selected group. A ratio below 0.8 is generally treated as evidence of adverse impact.
Why it matters to recruiters
Recruiters and HR teams design and run the steps that decide who moves forward: knockout questions, assessments, screening tools and interviews. Measuring adverse impact shows whether any of those steps quietly filters out a group. It is also the core measure behind AI bias audits, including the yearly audits New York City requires for covered automated hiring tools.
An example from a recruiting desk
A company gives an online test to 200 applicants, 120 men and 80 women. Sixty men pass, a 50 percent rate, and 28 women pass, a 35 percent rate. In this example the impact ratio is 35 divided by 50, or 0.70, below the 0.8 threshold. HR reviews the test content, finds a section unrelated to the job and removes it.
Tips that help
Track applicant counts and pass rates by group at every stage, not only at hire.
Check every step that uses a fixed cut off, such as a test score or knockout question.
Use statistical tests alongside the four fifths rule when numbers are small.
Document why each selection step is related to the job.
Mistakes to avoid
Checking only final hires and missing the step where the gap actually appears.
Assuming no intent means no legal risk.
Frequently asked questions
What is the four fifths rule?
It is a guideline from the US Uniform Guidelines on Employee Selection Procedures. If a group's selection rate is less than 80 percent of the rate for the group with the highest rate, federal agencies generally treat it as evidence of adverse impact. It is a first screen, not a final legal finding.
Is adverse impact the same as discrimination?
Not automatically. Adverse impact shows that a step affects one group more. It becomes unlawful discrimination when the employer cannot show the step is job related and consistent with business necessity, or when a less discriminatory alternative was available. This is not legal advice.
Does adverse impact apply to AI hiring tools?
Yes. US anti discrimination law covers selection procedures whether a person or software makes the call, and employers are generally responsible for tools they use. New York City also requires independent bias audits of covered automated tools. Test AI tools for adverse impact like any other step.
