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80/20 Rule: Are You Compliant or Gambling With The Company’s Money?

I have no official stats or proof on this however I’m willing to wager that 80% of companies in the U.S.A. are not compliant in some form or other. There are 2 reasons why they get away with it. The first is ignorance and the 2nd is luck.

Most people think of compliance as a safety issue, as in OSHA. But compliance is much bigger than that. I’m going to discuss Title VII of the 1964 Civil Rights Act. Surprisingly to me, many HR programs do not teach compliance to their HR students. They have no knowledge of Title VII of the Civil Rights Act and its protected classes provisions. Which means those HR pros bring their deficiencies into the workplace – and that lack of knowledge or ignorance could cost you millions of dollars.

Have you heard of the 80/20 rule? Not the one about diets or relationships! The 80/20 rule is a provision under Title VII of the Civil Rights Act. It falls under the disparate impact employment law doctrine. Basically if an employer’s hiring, promotion and disciplinary practices causes an “adverse impact” on any protect class; age, race, sex, and religious then that is a violation of the law and you can be held liable.

It can be confusing because there is disparate impact which is unintentional and disparate treatment which is intentional but either way the law doesn’t consider intent – you either did it or you didn’t. Not knowing or ignorance is no defense.

I’ve actually had to use the 80/20 rule against an employer. It was right after I received my Master’s in HR, and I was working a regular job just to pay the bills. After a couple of years I noticed that company hadn’t promoted an African American in nearly 2 years – 20 months to be exact. The staff was over 80% African American yet zero was promoted in a 20 month period out of 12 open positions. Quite a few applied but none were promoted.

Anyway, applying the 80/20 rule, I crunched the numbers and the company easily failed! The rule states, “An employer’s selection criteria has an adverse impact for purpose of plaintiff’s prima facie where members of the protected group are selected at a rate less than 4/5ths or 80% that of the majority or highest selection rate.” So if you hire a predominately female workforce but you only select men for promotions then you are causing an adverse impact to a protected class and if you can’t legally defend your reasons for making those selections you could be found liable.

In my case, the math was easy – zero promotions for the mostly African American staff – which represented a clear violation of the 80/20. It was causing an disparate impact and I think it was intentional. It killed morale because everyone felt as if they had no chance at promotion. I notified the HR department who were clueless – they had to call corporate who knew it was a huge problem and immediately took action. They instituted a company-wide hiring freeze , fired some people, apologized and promised sweeping changes to their future selection process. And just like that – everyone was being promoted – equally – fairly.

I didn’t sue because that was not the point.

Compliance laws are there for a reason – to ensure everyone gets a fair chance. Unfortunately, there are some people who hire whoever they want with no regard to the effect it may have on others. Intentional or unintentional? Who cares? Just make sure YOU are operating in compliance with all your processes, especially those that affect pay and compensation.

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