4/5th’s Rule
4/5th Rule: The four-fifths rule is the
simplest and most common way of estimating adverse impact. The Uniform
Guidelines indicate that the 4/5th’s rule is the preferred method for
determining adverse impact unless samples are very small or very large. The
4/5th’s rule can be computed according to the four steps shown below:
1) Calculate the selection rate for each
protected group that makes up more than 2% of the applicant pool. The selection
rate is equal to the total number or applicants within the group that are hired
divided by the total number of applicants within that group.
2) Observe which group has the highest
selection rate. This is not always the white, male, or “majority”
group.
3) Calculate the impact ratio by dividing
the selection rate for each group by the selection rate of the group with the
highest selection rate.
4) Determine if the selection rates are
substantially different. If the impact ratio is less than .8, there is a
4/5th’s rule violation.
Discuss the advantages and disadvantages of
the rule.
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