Compliance · July 18, 2026 · 5 min read

Adverse impact and the four-fifths rule, explained

Adverse impact is when a selection process screens out a protected group at a disproportionate rate. The four-fifths rule is the standard first test — here's how it works and how to monitor it.

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What adverse impact is

Adverse impact occurs when a neutral-looking selection process screens out a protected group at a substantially higher rate than others. It can happen with no intent to discriminate — which is exactly why it must be measured, not assumed away.

How the four-fifths rule works

Compare each group's selection rate to the highest group's. If the ratio falls below 0.8, that is a flag. Example: if the highest group passes at 60% and another at 40%, the ratio is 0.67 — below four-fifths, so the process warrants review.

The rule traces back to the 1978 US Uniform Guidelines on Employee Selection Procedures, and it is deliberately blunt — a screening heuristic, not a statistical proof. It has known failure modes: with small candidate counts a single decision can swing the ratio wildly, and a process can clear 0.8 and still be unfair, or fall below it for reasons unrelated to the assessment. This is exactly why regulators (and NYC's Local Law 144) treat a failed ratio as a trigger to investigate, not an automatic verdict.

Monitoring it continuously

Impact ratios drift as your candidate pool changes, so a one-time check is not enough. Per-role pass-rate monitoring — the kind LL144 expects — turns fairness from an annual scramble into a standing signal.