Four-Fifths (80%) Rule
1) Meaning
The Four-Fifths Rule (80% Rule) is a guideline used in employment law and HR analytics to detect adverse impact (unintentional discrimination) in hiring, promotions, or other employment practices.
It states:
A selection rate for a protected group should be at least 80% (four-fifths) of the selection rate of the group with the highest rate.
If it is less than 80%, there may be evidence of adverse impact.
2) Formula
$\text{Impact Ratio} = \frac{\text{Selection Rate of Protected Group}}{\text{Selection Rate of Reference Group}}$
- If Impact Ratio ≥ 0.80 (80%) → Generally acceptable.
- If Impact Ratio < 0.80 (80%) → Potential adverse impact (needs further review).
3) Example
A company hires:
- Male applicants: 100 applied, 60 hired → Selection Rate = 60%
- Female applicants: 50 applied, 20 hired → Selection Rate = 40%
Impact Ratio: $\frac{40\%}{60\%} = 0.67 = 67\%$
Since 67% < 80%, this fails the Four-Fifths Rule, suggesting possible adverse impact against women.
4) Why It Matters
- Legal Compliance: Part of U.S. Equal Employment Opportunity Commission (EEOC) Uniform Guidelines on Employee Selection Procedures.
- Fairness Check: Ensures no group is systematically disadvantaged.
- HR Analytics: Helps evaluate hiring, promotion, training, and pay practices.
5) Limitations
- Not absolute law: It’s a guideline, not a strict legal test. Courts may use additional evidence.
- Small sample sizes: Ratios may be misleading with low numbers.
- Doesn’t prove intent: Failing the test doesn’t mean discrimination is intentional; it signals potential bias for further investigation.
Bottom line:
The Four-Fifths (80%) Rule is a practical test for adverse impact: a protected group’s selection rate should be at least 80% of the majority group’s rate. Falling below this threshold indicates possible discrimination requiring further review.