Adverse impact refers to the idea that a particular employment assessment or practice is discriminating against individuals from a legally protected group. This is determined by the 80% Rule. To calculate this, the hiring rate of the majority group is multiplied by .80 to determine the minimum hiring rate for the minority group.
For example, if an assessment leads to hiring 70% of the Whites who applied for the position but only leads to hiring 50% of the Blacks who apply, .70 is multiplied with .80 to obtain the minimum rate of .56 for minority group. Since this is higher than the reality (50%), this assessment is considered to be having an adverse impact for Blacks.
There are two reasons for an assessment/procedure to result in adverse impact:
- Differential Validity: when a measure is significantly more valid for one group over the other based on a characteristic (race, gender, age, etc).
- Unfairness: when members of one group consistently score lower on the predictor and this difference is not related to differences in the criterion.