Practitioner Guidelines for Psychometric Testing

Adverse Impact

Adverse impact is found when there is 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.

The Four-Fifths Rule

A rule of thumb for determining adverse impact is when a selection rate for any race, sex, or ethnic group is less than four-fifths (4/5ths) or eighty percent (80%) of the selection rate for the group with the highest selection rate.

For example, if the hiring rate for whites is 60%, for American Indians 45%, for Hispanics 48%, and for Blacks 51%, and each of these groups constitutes more than 2% of the labor force* in the relevant labor area, a comparison should be made of the selection rate for each group with that of the highest group (whites). These comparisons show the following impact ratios: American Indians 45/60 or 75%, Hispanics 48/60 or 80%, and Blacks 51/60 or 85%. Applying the 4/5ths or 80% rule of thumb, on the basis of the above information alone, adverse impact is indicated for American Indians but not for Hispanics or Blacks.

Calculating Adverse Impact

Adverse impact is determined by a four-step process.

  1. Calculate the rate of selection for each group (divide the number of persons selected from a group by the number of applicants from that group).
  2. Observe which group has the highest selection rate.
  3. Calculate the impact ratios, by comparing the selection rate for each group with th`t of the highest group (divide the selection rate for a group by the selection rate for the highest group).
  4. Observe whether the selection rate for any group is substantially less (i.e. usually less then 4/5ths or 80%) than the selection rate for the highest group. If it is, adverse impact is indicated in most circumstances.

For example:

Applicants Hires Selection Rate/Percent Hired
80 White 48 48/80 or 60%
40 Black 12 12/40 or 30%

A comparison of the black selection rate (30%) with the white selection rate (60%) shows that the black rate is 30/60, or one-half (or 50%) of the white rate. Since the one-half (50%) is less than 4/5ths (80%) adverse impact is usually indicated.

The determination of adverse impact is not purely arithmetic however; and other factors may be relevant. For example, if a lower selection rate continued over a period of time, so as to constitute a pattern, would constitute adverse impact, warranting the need for validity evidence.

* Local HR professionals should be aware of whether any group constitutes either 2% or more of the total labour force in the relevant labour area, or 2% of more of the applicable workforce. Thus, impact determinations should be made for any decision for any group which constitutes 2% or more of the labour force in the relevant labour area. For hiring, such determination should also be made for groups which constitute more than 2% of the applicants; and for promotions, determinations should also be made for those groups which constitute at least 2% of the user's workforce.