What the analysis requires
EEOC guidance directs employers to analyse whether layoff selection criteria produce a disparate impact on any protected class before the reduction is executed. Running this analysis after the fact — or not at all — creates exposure that defending on the merits alone cannot fully cure.
The primary standard is the 4/5ths (80%) rule: if the selection rate for any protected group is less than 80% of the selection rate for the most-selected group, a potential adverse impact is indicated. The rule is a screening test, not a legal standard — statistical significance testing is required to assess whether the disparity is meaningful.
Federal contractors are subject to additional requirements under OFCCP. For all employers, running both the 4/5ths test and statistical significance testing together is the approach that withstands scrutiny — the 4/5ths rule alone is insufficient for groups with small sample sizes, and statistical significance alone can produce technically-valid but practically-misleading results.
The protected classes that must be analysed include race and ethnicity, gender, age (specifically employees 40 and over, under the ADEA), national origin, religion, and disability status. Incomplete analysis — covering some groups but not others — is a common gap in manual processes.