Skip to content

What is disparate impact and how can your organization avoid it?


Every organization should work to prevent disparate impact and disparate treatment of its employees, to create a healthy workplace culture, attract the best possible talent and avoid legal consequences.

But what’s the difference between disparate impact and disparate treatment, and how can companies identify and correct potential problems?

Disparate impact versus disparate treatment

The terms look and sound similar, but there’s a major difference in their meanings. Disparate treatment refers to conduct that intentionally discriminates against employees. For example, a hiring manager who refuses to consider candidates of one gender for certain roles is engaging in disparate treatment of those applicants.

Disparate impact, on the other hand, refers to policies or practices that appear to be neutral, but which have an unintended adverse effect on a protected class of employee. Instances of disparate impact can occur even when an organization intends to treat its employees fairly.

When can disparate impact happen? What can it look like?

When organizations don’t evaluate their policies and practices for their impact on protected groups at each stage of the employee life cycle, they may create disparate impacts at any point from the application process through promotions and layoffs.

At the application stage, for example, instantly eliminating candidates with any type of criminal conviction creates a disparate impact on some minority groups. To address that unintentional harm, many states have passed “ban the box” laws that require employers hold off on asking about criminal history early in the application process.

Another application-stage practice ‒ requiring candidates to share their salary history ‒ creates disparate impacts that can follow employees through their entire careers and limit their lifetime earnings. Because some women are less likely to negotiate and are often paid less than men for the same work, employers who based new hires’ salary on their previous pay unintentionally perpetuate that cycle of pay discrimination. Many states have instated bans on asking candidates for their salary history.

As employees move up into higher levels of leadership, they may face different kinds of practices that cause disparate impacts. Some of these practices may be driven by unconscious or structural bias.

For example, the idea that an employee doesn’t “have the look” for a leadership role because of their hair, ethnicity or gender may not be stated or even thought outright, but the impact of that unconscious bias can stall women and minority employees’ careers. Standardized tests intended to evaluate employees for leadership roles can also create a disparate impact if the content of the tests or the way they’re administered is subtly biased.

What are the consequences of disparate impact?

Because disparate impact affects entire groups of workers, it can create systemic inequities that affect many people in your organization. That impact can lead to legal consequences like class-action lawsuits, even if the discrimination is unintentional.

Even without a legal battle, disparate impact can damage the employee experience for those affected, undermine diversity and inclusion efforts, increase turnover and make recruiting top talent more difficult.

How can you identify and eliminate disparate impact?

How can you know which policies and practices have a negative effect on some employee groups? Your HR team can help your company avoid disparate impact by reviewing your hiring, management and promotion practices.

Here are a few steps that can help reduce the likelihood of unintentional discrimination.

1.      Conduct an objective job analysis for each position on your team or in your company

Ensure that the requirements for each job are truly necessary for performing the job. Then, make sure those requirements are identified in the job description.

This gives you an opportunity to consider whether the requirements for each position are truly required for the role. For example, all of your company or department job descriptions may call for a bachelor’s degree, but would a certain number of years of experience or a certificate from a technology bootcamp serve the same purpose for some of those roles? If so, you can expand those requirements and avoid unintentionally excluding some classes of candidates.

2.      Cast a wider net when you post job openings

Another way to avoid disparate impact on some groups of candidates is by posting positions on a variety of job search sites, not just one. The goal is to expand your reach to a more diverse candidate pool, instead of always drawing candidates from one or two sources.

3.      Collect, store and analyze applicant data

Including voluntary EEO surveys in your application process can help you evaluate the diversity of the candidates you’re bringing in. Using an applicant tracking system also lets you track candidates and record information about why someone was selected or not selected for a role.

This kind of information can help you see if there are groups of candidates you’re not reaching, or who aren’t getting hired, so you can investigate and see if part of your process is contributing to that dynamic. The data is also important for compliance with employment laws.

4.      Take a look at your workforce analytics

Do promotions in your company go mostly to employees from the same groups? Are some groups of employees underrepresented in management or overrepresented in layoffs? If so, reviewing your processes can help reveal areas that may be impacting those underrepresented groups negatively.

When your managers document why they’ve made certain decisions, in a performance review, a promotion or a disciplinary action, you have data you can use to identify potential problem areas and make improvements.

6.      Make training a habit

In addition to antidiscrimination and antiharassment training for your entire workforce, you may want to add training on implicit bias. You may also want to provide role-specific training for managers and leaders that includes best practices for interviews.

Disparate impact is one HR pitfall that can damage your company – but there are others. Want to learn more? Download the Insperity guide, 7 most frequent HR mistakes and how to avoid them.