March 26, 2018
Back to Basics- What is Disparate Impact


Blog > Back to Basics- What is Disparate Impact

It can be difficult to manage employees and run a business. You try to manage with fairness and ensure your employees have a comfortable work environment. However, there are times, despite our best well intentioned efforts, we make mistakes. Sometimes those mistakes can even violate our employees rights and lead to a claim of discrimination. Disparate Impact is a form of discrimination that can sneak up on you and can impact even the most well intentioned employers. In fact, it is often the most well intentioned that are faced with claims of Disparate Impact.

Before we can talk about Disparate Impact, we should talk about Discrimination, and before we talk about Discrimination, we need to talk about employment law in the United States. There are multiple State and Federal laws preventing discrimination in the workplace. Some states, like New York, California and Massachusetts are on the cutting edge of modern employment law, recognizing our current landscape and adding State regulated and enforced protections for minority classes. While some states, like the one I happen to live in, actively try to pass laws to ensure these populations do not have protections. Regardless of the state you happen to live or work in, Federal laws, like Title VII of The Civil Rights Act, ensure that employers are not able to discriminate against their employees on the basis of the employee’s sex, race, color, national origin, or religion.

  • Discrimination can most easily be defined as treatment or consideration of, or making a distinction in favor of or against, a person based on the group, class, or category to which that person belongs rather than on individual merit.

Most people are very familiar with willful Discrimination - meaning Discrimination that was purposeful or “obvious”. This is called Disparate Treatment and it occurs when an employer treats an applicant or employee less favorably than similarly situated applicants or employees. This different treatment is because of a person’s protected class (like their sex, race, color, national origin, or religion). A less obvious form of discrimination is Disparate Impact. Disparate Impact occurs when an employer has policies or practices that appear fair and are evenly applied but have a discriminatory impact on members of a particular protected class.

The following story is a good example of a very well intentioned manager, applying a policy which they thought was fair and ended up having a significant Disparate Impact on a minority group.

Several years ago the President of Dragon Stone Manufacturing* was walking the shop floor. He noticed that the vast majority of his employees were male. He wanted to have an inclusive and diverse workforce so he began a concerted effort to hire more diverse candidates. He began an advertising campaign focused on diversity and began attending traditionally women and minority focused events to attract new employees. He was very pleased that his efforts were successful, within two years he saw a significant difference on the shop floor, he now had an almost even split between men and woman, and 30% of his workforce were minorities. Unfortunately Dragon Stone Manufacturing lost a major contract and the President needed to layoff 40% of his workforce. In an effort to be as fair as possible, he decided to use the tried and true method of “last in, first out”, those with the least seniority were to lose their jobs and those with the longest tenure would stay. While it may seem very fair to lay off people with the lowest tenure, because all the highest tenure people are most likely men and the lowest tenure people women and minorities, the President ended up laying off a much higher percentage of women and minorities. In this example, the Presidents “very fair” method of “last in, first out” is actually an example of Discrimination. While he was very well meaning, his policy created a Disparate Impact based on sex and race.

It is extremely important to examine the consequences of any business decision. What may seem fair on the surface, could actually create a Disparate Impact on your employees (or potential employees). In the case of Dragon Stone Manufacturing, a Disparate Impact report analyzing the choices of who would be impacted by the layoff could have saved the company many years of litigation. At the end of the day, being legally compliant not only protects you, but protects your current and former employees as well.



*(this name was definitely changed to protect the company and to throw in a reference to GOT)


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