Disparate impact, also called adverse impact, is discrimination that results from a neutral-looking policy or practice that disproportionately screens out a protected group and isn't job-related and consistent with business necessity. Intent doesn't matter; the effect does.
Key takeaways
- The concept comes from the Supreme Court's 1971 decision in Griggs v. Duke Power Co.
- The four-fifths rule flags possible adverse impact when one group's selection rate is under 80% of the highest group's.
- Employers can defend a practice by showing it's job-related and necessary, unless a less discriminatory alternative exists.
- AI and automated hiring tools are a growing source of disparate impact risk.
How disparate impact works
In disparate impact cases, the plaintiff points to a specific practice, such as a test, degree requirement, or screening algorithm, and shows it excludes a protected group at a meaningfully higher rate. The employer then must show the practice is job-related and consistent with business necessity. Even then, the plaintiff can win by showing an equally effective, less discriminatory alternative was available (EEOC, Title VII of the Civil Rights Act of 1964).
The four-fifths rule from the federal Uniform Guidelines on Employee Selection Procedures is a quick screen, not a legal conclusion. Statistical significance tests are usually used alongside it.
Enforcement priorities shifted in 2025, when an executive order directed federal agencies to deprioritize disparate impact enforcement. The theory remains part of Title VII, though, so private lawsuits can still be brought, and several states and cities, including New York City for automated hiring tools, have their own rules.
Disparate impact example
A retailer uses an online assessment to screen 1,000 applicants.
| Group | Applicants | Passed | Selection rate |
|---|---|---|---|
| Group A | 600 | 300 | 50% |
| Group B | 400 | 140 | 35% |
Group B's rate is 70% of Group A's (35 divided by 50), below the four-fifths threshold. The retailer should check whether the assessment predicts job performance and whether a different tool would work as well with less impact.
Why disparate impact matters for employers
Disparate impact matters because good intentions don't prevent it. Degree requirements, credit checks, height minimums, and algorithmic screens can all exclude qualified people without anyone noticing. Skills-based hiring is partly a response: LinkedIn's Economic Graph research reports that a skills-based approach can grow some talent pipelines several times over (LinkedIn Economic Graph, skills-based hiring research).
Before adopting a new assessment or AI screening tool, ask the vendor for adverse impact data and validation studies, and run your own checks after launch. Our AI in HR guide covers the questions to ask.
Common disparate impact mistakes to avoid
Assuming neutral policies are safe
Effect, not intent, drives disparate impact.
Never auditing selection rates
Check pass rates by group at each hiring stage.
Buying AI tools without validation data
Employers remain responsible for tools they use.
Keeping requirements that aren't needed
Degree or experience requirements that don't predict performance are hard to defend.
Disparate impact: questions people also ask
What is the difference between disparate impact and disparate treatment?
What is the four-fifths rule?
Can disparate impact be legal?
Does disparate impact apply to AI hiring tools?
Is disparate impact still enforced?
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HRTally glossary entries are written by people who have run US payroll, benefits, and HR operations, then checked line by line against primary sources such as the IRS, Department of Labor, EEOC, and Bureau of Labor Statistics. Dollar limits and rates are for 2026 unless stated. We review every entry at least twice a year and whenever a rule changes. This page explains general rules and isn't legal or tax advice; state law can differ. Read our editorial standards.
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<blockquote>Disparate impact, also called adverse impact, is discrimination that results from a neutral-looking policy or practice that disproportionately screens out a protected group and isn't job-related and consistent with business necessity. Intent doesn't matter; the effect does.</blockquote><p>Source: <a href="https://www.hrtally.com/hr-glossary/disparate-impact/">HRTally HR Glossary, Disparate impact</a></p>
Written by the HRTally Research Team
Our guides are written and reviewed by people with hands-on US HR, payroll, and HR technology experience. Legal and tax facts are checked against primary sources, such as the Department of Labor, IRS, EEOC, and USCIS, and linked at the end of each guide. Vendors never review or pay for our editorial content.