Shortcomings of the 80% Rule - What is the 80% Rule?

According to "The Statistics of Discrimination" by Paetzhold and Willborn, the "predominant method" for comparing favored and disfavored groups of employees is the four-fifths rule. The EEOC articulates this rule as follows:

A selection rate for any race, sex, or ethnic group which is less than four-fifths (4/5) (or eighty percent) of the rate for the group with the highest rate will generally be regarded by the Federal enforcement authorities as evidence of disparate impact, while a greater than four-fifths rate will generally not be regarded by Federal enforcement agencies as evidence of disparate impact.
The 80% Rule was originally framed in 1971 by the Technical Advisory Committee on Testing (TACT, a panel of 32 professionals assembled by the State of California Fair Employment Practice Commission. The Commission published the State of California Guidelines on Employee Selection Procedures in October 1972. This was the first government document that referenced the 80% Rule in the context of disparate impact. The 80% Rule was codified in the 1978 Uniform Guidelines on Employee Selection Procedures, which is used in Title VII enforcement by the U.S. Equal Opportunity Commission, Department of Labor, and the Department of Justice.

According to the EEOC Uniform Employee Selection Guidelines, adverse impact is determined by a four-step process:
(1) Calculate the rate of selection for each group - divide the number of persons selected from a group by the number of applicants from that group;
(2) Observe which group has the highest selection rate;
(3) Calculate the impact ratios by comparing the selection rate for each group with that of the highest group - divide the selection rate for a group by the selection rate for the highest group;
(4) Observe whether the selection rate for any group is substantially less, i.e., usually less than 4/5 or 80%, than the selection rate for the highest group. If it is, adverse impact is indicated in most circumstances.
To demonstrate how the actual calculations work, assume that we have a population of 10,000 people. Half (5,000) are "protected" and half (5,000) are non-protected. Further assume that all 5,000 of the non-protected individuals are "selected" for some positive employment outcome (i.e., promotion, training opportunities, etc.), and that 4,000 of the 5,000 protected individuals are "selected". The calculation of the 80% Rule here would be as follows:

In this example, because the ratio is 80%, we would infer that no disparate impact exists.

The 80% Rule is a relatively straightforward calculation and is easy to implement. This has resulted in its becoming "the most favored application" for determining disparate impact in employment discrimination matters (Scott Morris and Russell Lobsenz). However, the 80% Rule has some serious shortcomings. These shortcomings will be discussed in subsequent postings.