The Value of Understanding Adverse Impact

Adverse impact is the analysis of selection rates of protected and non-protected groups. According to the guidelines “a selection rate for any race, sex or ethnic group which is less than four-fifths (or 80%) of the rate for the group with the highest rate will generally be regarded by the Federal enforcement agencies as evidence of adverse impact, while a greater than four-fifths rate will generally not be regarded by Federal enforcement agencies as evidence of adverse impact.” For example, say there are 135 applicants: 72 non-minority compared to 63 minority.  Seven of the 72 non-minority applicants were hired, which is a 9.7% hiring rate. On the other hand, 3 of the 63 minority candidates were hired making the hiring rate 4.8%.  The 80% rule states that the selection rate of the protected group should be at least 80% of the selection rate of the non-protected group. So, in this case, the adverse impact is 49.5%. Common adverse impact analyses have been traditionally minorities vs. non- minorities, or males vs. females. Now, more detailed analyses are conducted to understand the “favored group.”

Adverse impact analysis is used by employers to create affirmative action plans as well as for creating detailed personnel action data (hires/applicants, promotions, terminations). For employers being proactive about compliance needs, the personnel action data is of much significance as it provides an opportunity to dig deeper into more refined pools like analysis by disposition reasons, or analysis by promotions. The new regulations with its component of self-identification provide some additional data for adverse impact analysis. Usually, male candidates are more forward with identifying as having a disability and among veterans, male veterans identified as disabled 37% more than female veterans. The adverse impact analysis that could come out of this data is that men are more likely to ID as disabled; male veterans are more likely to ID as disabled and men are more likely to be veterans. So the question could be raised that will focus on candidates with disabilities and /or veterans impact women?

Companies who are committed to using adverse impact analyses to conduct effective and useful outreach will use such data to evaluate HR programs, participation in wellness programs, for internal training and leadership programs and so forth. The data gathered should be analyzed in a given period of time. As a practice, federal contractors should gather demographic information on all eligible employees on race/ethnicity, gender, job group, department etc. Then, if problem area is identified, they need to look at other variables in the data to narrow down where the issue may be occurring. Findings must be shared and actions to remedy issue have to be proposed and documented. Once changes are implemented, employers need to monitor to see if desired results have been achieved. If not, further action and documentation will be needed.

The idea really is that employers cannot become complacent any longer. Adverse impact analyses need to be conducted every step of the selection process with sincerity. Such analyses on current employees will also rectify impediments to employees’ career advancement opportunities.

Remember, though that you are not alone trying to understand this OFCCP maze of compliance needs that makes adverse impact so important. Read our President’s blog and see what kinds of support are available. For compliance related products please visit our webpage at www.americasjobexchange.com/employer/

 

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