Adverse Impact: What It Is and Why It Matters in Hiring

Is your hiring process as free from bias as it seems? You might assume that since your hiring practices look bias-free at first glance that you’re in the clear and successfully opening the pipeline to a more diverse and inclusive company through your new talent. 

But that’s often untrue, because bias can sneak up in unexpected ways that sabotage your best attempts. The most common way this happens is through adverse impact in hiring—here’s what you need to know about it and how to eliminate it from your hiring process.  

What is Adverse Impact? 

Adverse impact is any employment practice or policy that appears neutral, but actually has a negative and discriminatory effect on one or more protected groups. For example, if you attract a wide range of applicants to your hiring process but end up hiring almost exclusively white men, that indicates there’s adverse impact at work in your hiring process. 

Avoiding adverse impact is especially critical for businesses today to consider because few businesses are outright discriminatory in their hiring and employment practices. But that progress doesn’t mean that discrimination doesn’t happen, or that well-intentioned employment practices don’t have unintended but very real impacts on less powerful groups in the workplace. 

While adverse impact can seem hard to define and identify, the Equal Employment Opportunity Commission (EEOC) issued updated Uniform Guidelines on Employee Selection Procedures to clarify what adverse impact means for employers. 

Typically, the EEOC will consider any group’s selection rate that is less than 80% or four-fifths of the selection rate for the group with the highest selection rate as problematic. That means if your hiring process turns down more of the women, people of color, older people, or LGBTQ people at a substantially greater rate than the group with the greatest selection rate, you have a serious issue on your hands that HR needs to address and solve. 

Adverse Impact in Hiring 

Adverse impact can occur at any part of the employment lifecycle, but this guide will focus specifically on adverse impact in the hiring process. After all, if your hiring practices are keeping out qualified applicants because of unconscious bias or unintentional discrimination, your company’s commitment to DEI will suffer and you’ll lose out on great potential employees. 

Typically, adverse impact during the hiring process comes in a few ways. 

• Job descriptions may contain a listed range of experience (i.e. 3-5 years), which can rule out older job applicants with more experience. 
• Requiring that candidates pass a physical strength or agility test that eliminates disabled workers who are actually capable of completing all needed tasks for the job. 
• Unstructured interviews leave applicants who have more in common with the interviewer at an advantage, meaning more of the same people are hired. 

Also, anything you use to make a hiring selection decision can be considered a test, which means the EEOC can scrutinize it and find it potentially discriminatory, opening your business up to class-action lawsuits. 

Best Practices for Avoiding Adverse Impact 

So how can you be proactive about avoiding adverse impact in your company’s hiring process? This is a critical task for HR teams, as it’s often difficult for individual hiring managers to tackle this systematic issue on their own. Here are a few of the best ways you can eliminate adverse impact: 

• Ensure your job descriptions are written using inclusive language and don’t eliminate qualified applicants because of a poorly-worded phrase.  
• Conduct structured job interviews to ensure all applicants are asked the same questions and graded on the relative quality of their answers, not their connection with the interviewer. 
• Create bias-free assessment tests to evaluate candidates on the skills they can offer instead of simply their background or experience, which can eliminate many great candidates. 

The right hiring tool can help you create a bias-free hiring experience to benefit both your company and your candidates. Cangrade’s hiring solutions are built to remove bias from the hiring process and are ADA compliant to drive your DEI goals and increase hiring equity. Request a demo today and see it in action for yourself.