The Americans with Disabilities Act (ADA), 29 CFR 1630.2, and the Age Discrimination in Employment Act (ADEA), 29 U. S.C. 626(e), protect individuals from employment discrimination based on disability or age. Selection rates apply to any employment decision and refer to the proportion of individuals chosen for hire, promotion, pay increase, discipline, training, termination, and others. If an employment decision favors a substantially smaller proportion of any protected group, that employment practice has adverse impact. Adverse impact provides evidence of employment discrimination in violation of Title VII.
The 4/5ths rule, as described in the Uniform Guidelines on Employment Selection, 41 CFR, 60-3, suggests that when the selection rate for the minority group falls below 80% of the majority group selection rate, the employment practice adversely affects the minority group. Adverse impact suggests unlawful employment practices and requires evidence of job-relatedness or validity to refute discrimination claims. Government agencies, including the Equal Employment Opportunity Commission (EEOC), Department of Justice (DOJ) and Office of Federal Contract Compliance Programs (OFCCP) conduct adverse impact analysis using the 4/5ths' rule as an indication of employment discrimination.
However, the 80% rule provides only a rule of thumb. A more precise measure of adverse impact identifies the statistical significance of observed difference between selection rates for protected groups. Statistical tests account for factors that may render results of applying the 80% rule uniformly, (such as small numbers of individuals in the original selection pool), in the protected groups. Courts generally accept statistical evidence over the 4/5ths rule. Thus, an employer whose selection rates fail to meet the 4/5ths rule may refute discrimination claims by showing that the difference is not statistically significant. Likewise, an employer who meets the 4/5ths rule may still be legally liable if statistical tests support the significant difference in selection rates between groups. Courts generally recognize a 2 standard deviation difference as statistically significant, suggesting that the difference cannot be attributed to chance. If chance does not explain the difference, discrimination may account for the discrepancy.