The law recognizes two forms of unlawful discrimination.  The most familiar is disparate treatment, in which an employee’s protected class status is a motivating factor in an adverse employment action. A less familiar, and sometimes confusing, form of unlawful discrimination is disparate impact discrimination.  This occurs when an employer’s apparently neutral policy, practice, or criterion disproportionately impacts applicants or employees of a particular protected class.  For example, a hiring policy that requires applicants to live within a mile of the employer’s location has no direct connection to race or ethnicity, but if the neighborhoods in that mile radius are overwhelmingly white, the facially neutral policy can make it significantly less likely that non-white applicants will qualify. 

Proof of disparate treatment – the more familiar kind – it requires a showing of employer intent to discriminate. Proof of disparate impact does not.  Employers can be held liable for the effect of their policies and practices on protected groups, regardless of their motivation.  In order to avoid liability in a disparate impact case, the employer must demonstrate that the policy, practice, or standard in question is job-related and a business necessity.

Most of the time, employers deal with concerns or claims of disparate treatment. Disparate impact generally only becomes an issue when groups of employees are affected by an action or policy.  It is almost never raised in situations involving a single employee.  Disparate impact can become a worry when an employer carries out a reduction in force, reduces salaries or hours for a group of employees, or adopts a new set of hiring criteria.  In any of these situations, an employer can be held liable for discrimination if a protected group is disproportionately impacted.

Disparate impact cases can be particularly alarming to employers because they involve claims by a large number of plaintiffs.  They are expensive to defend and the judgments paid by employers who are found to have engaged in disparate impact discrimination can be large.  Like disparate treatment claims, however, disparate impact claims can be avoided and, if necessary, defended.  Avoidance requires planning and attention to the potential effect of a planned policy or action.  Successful defense requires careful documentation of the non-discriminatory business reasons for the action or policy in question and a clear explanation of the business necessity that motivated the policy or action. 

Any time a personnel action or personnel policy is likely to impact a significant number of applicants or employees, employers would be wise to ask these questions:

• What is the business reason for this policy or action? Is it sound? Is it documented? Will it be understood by individuals outside the circle of decisions-makers?
• Is there an alternative policy or action that could produce the desired result? If so, has it been considered?

If the initial review of the likely results of the action or policy suggests that women, people of color, or employees over 40 will be impacted the most, employers should pause and do the following: 

• Carefully review the circumstances to see if patterns are evident.  Is a particular supervisor recommending the selection of more women than men for a RIF? Is a new policy a reaction to circumstances better addressed directly? Are selection standards being uniformly applied?
• Consider doing a statistical adverse impact analysis to determine the extent and legal significance of the disparate impact on protected groups.
• Dig deeper if an adverse impact analysis produces results indicating that a particular protected group will be disproportionately affected. Make sure that there are no alternative actions or policies available that accomplish the same result without the disproportional impact.  Make sure that none of the individuals responsible for creating the policy or selecting those impacted by an action are motivated by considerations of race, gender, age, or other protected class status. 

Most HR professionals and in-house counsel are used to questioning the reasons for and validity of individual personnel actions.  It is second nature to consider and eliminate the possibility of discriminatory motivation.  To avoid the significant risks associated with disparate impact discrimination, it’s essential that personnel policies and actions that affect large groups be subject to the same scrutiny.