Five Things to Know about “Disparate Impact” Rules: Based on federal regulatory guidance, employers must be very careful when taking a candidate’s criminal record into consideration.

As mentioned in our previous blog post, adverse actions that affect candidates for employment or promotion can expose employers to potential legal action. Most common are claims of “disparate impact” on protected classes.

Under guidance provided by the Equal Employment Opportunity Commission in 2012, consideration of arrest and conviction records in employment decisions is governed by Title VII of the Civil Rights Act of 1964. Because certain minority groups face higher rates of law enforcement action (African Americans and Hispanics are arrested at a rate two to three times higher than their proportion of the general population), unsuccessful candidates sometimes argue that an employer’s decision was, in effect, discriminatory.

Did you know that the legal term “disparate impact” was coined in a significant US Supreme Court
ruling on adverse impact? See Griggs v. Duke Power Co., 401 US 424, 431-32 (1971).

Note: The guidance is not codified as law. But failing to follow it could well expose an employer to a lawsuit or Commission investigation.

In light of that hazard (in addition to the adverse-action notification process addressed in our last blog post), employers are advised to create policies that consistently govern their decision-making. Those policies should include how an assessment should be conducted, as guided by five principles:

1. No “bright-line rule” controls—different candidates, different histories, and different openings should be individually assessed. And arrests, per se, are likely insufficient grounds for denying a candidate a job or promotion if no conviction or penalty is on record.
2. The creation of seemingly “neutral” policies can still cause disparate impacts that result in legal exposure for employers, even if the disparate impact was inadvertent.
3. The Commission emphasizes three criteria, known as “Green factors.” They derive from a 1975 federal appellate ruling, Green v. Missouri Public Railroad. These factors are commonly referred to as also known as the “nature/time/nature” test:

• What are the nature and gravity of the offense?
• How much time has elapsed since the offense, conduct, and/or completion of sentence?
• What is the nature of the job in question?

4. Another consideration is whether any evidence exists that the candidate performed the same type of work, post-conviction, with no known incidents of criminal conduct.
5. Last but not least, check for jurisdictional differences, because some states and localities simply adopt EEOC guidance while others require that additional factors be weighed.

These are more than technical formalities. The number of disparate-impact claims filed has been rising for years, with some resulting in multimillion-dollar settlements.

For a real-world example of the consequences, you need to look no further than a hefty fine of $2.8M
against Target Corp. to resolve EEOC discrimination findings.

Determining Adverse Impact: The Government Has a Method

Not surprisingly, the government wants businesses to understand the methodology applied to determine adverse impact. The Uniform Guidelines set out a selection procedure known as the “four-fifths” or “80 percent” rule. This procedure defines “adverse impact” based on the selection rate (or passing rate, where applicable): if the selection rate for a certain group is less than 80 percent of the group with the highest selection rate, there is adverse impact on the former. Although this seems straightforward, a closer look at the process, which has been outlined by the Society for Human Resource Management, may change your mind about that.

To learn more about how to avoid being run over by the class action juggernaut, watch for our next post. You can also read more about individual assessments here or view our webinar.

Global HR Research stands ready to assist employers via a platform of cutting-edge services. GHRR combines advanced screening technology, data, and business analytics to deliver better alternative background screening solutions supporting thousands of customers and their candidates. Serving small businesses to Fortune 500 companies and accredited by the National Association of Professional Background Screeners, GHRR is recognized by the Background Screening Credentialing Council.