Adverse impact

Disparate impact in United States labor law refers to practices in employment, housing, and other areas that adversely affect one group of people of a protected characteristic more than another, even though rules applied by employers or landlords are formally neutral. Although the protected classes vary by statute, most federal civil rights laws protect based on race, color, religion, national origin, and sex as protected traits, and some laws include disability status and other traits as well.

A violation of Title VII of the 1964 Civil Rights Act may be proven by showing that an employment practice or policy has a disproportionately adverse effect on members of the protected class as compared with non-members of the protected class. Therefore, the disparate impact theory under Title VII prohibits employers "from using a facially neutral employment practice that has an unjustified adverse impact on members of a protected class. A facially neutral employment practice is one that does not appear to be discriminatory on its face; rather it is one that is discriminatory in its application or effect." Where a disparate impact is shown, the plaintiff can prevail without the necessity of showing intentional discrimination unless the defendant employer demonstrates that the practice or policy in question has a demonstrable relationship to the requirements of the job in question. This is the "business necessity" defense.

In addition to Title VII, other federal laws also have disparate impact provisions, including the Age Discrimination in Employment Act of 1967. Some civil rights laws, such as Title VI of the Civil Rights Act of 1964, do not contain disparate impact provisions creating a private right of action, although the federal government may still pursue disparate impact claims under these laws. The U.S. Supreme Court has held that the Fair Housing Act of 1968 creates a cause of action for disparate impact. Disparate impact contrasts with disparate treatment. A disparate impact is unintentional, whereas a disparate treatment is an intentional decision to treat people differently based on their race or other protected characteristics.

While disparate impact is a legal theory of liability under Title VII, adverse impact is one element of that doctrine, which measures the effect an employment practice has on a class protected by Title VII. In the Uniform Guidelines on Employee Selection Procedures, an adverse impact is defined as a "substantially different rate of selection in hiring, promotion, or other employment decision which works to the disadvantage of members of a race, sex, or ethnic group.". A "substantially different" rate is typically defined in government enforcement or Title VII litigation settings using the 80% Rule, statistical significance tests, and/or practical significance tests. Adverse impact is often used interchangeably with "disparate impact," which was a legal term coined in one of the most significant U.S. Supreme Court rulings on disparate or adverse impact: Griggs v. Duke Power Co., 1971. Adverse Impact does not mean that an individual in a majority group is given preference over a minority group. However, having adverse impact does mean that there is the “potential” for discrimination in the hiring process and it could warrant investigation.

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