Definition: 4/5ths Rule
The four-fifths rule prescribes that a selection rate for any group (classified by race, sexual orientation or ethnicity) that is less than four-fifths of that for the group with the highest rate constitutes evidence of adverse impact (also called ‘disparate impact’), that is, discriminatory effects on a protected group.
Adverse impact may occur in any of the company’s decisions related to employees – be it hiring, promotion, training, transfer or layoff.
A particular test or selection procedure must be evaluated for effectiveness in terms of selection based only on characteristics relevant to the job or task. It may, however, render disadvantage to members of a race, sex or ethnic group.
For instance, if a company hires 50 percent of male applicants for positions in a predominantly male occupation but the rate for female applicants is 20 percent, there may be judged to be an issue of discrimination as the rate of hiring women is only 40 percent of that for male applicants, thereby violating the four-fifths rule