Business necessity is a legal concept that permits employers to use employment criteria that may disproportionately affect a particular group of individuals, provided that the employer can demonstrate that the criteria are job-related and consistent with the needs of the business (BambooHR, 2023). This concept is codified in the Civil Rights Act of 1991, which was enacted to strengthen the Civil Rights Act of 1964 and prevent unlawful and intentional discrimination in the workplace (Criteria Corp, 2023).
Key Facts
- Definition of Business Necessity: Business necessity is a legal concept that justifies an employer’s decision to use employment criteria that disproportionately affects a specific group of individuals. It is based on the assumption that the company has legitimate reasons, related to the needs of the business, to implement such criteria.
- Permitted by the EEOC: The Equal Employment Opportunity Commission (EEOC) allows the use of hiring criteria that may cause disparate impact if they are shown to be “job-related and consistent with business necessity”. This means that businesses must demonstrate that the criteria used are necessary for the successful functioning of their operations and essential to the role.
- Disparate Impact: Disparate impact refers to the disproportionate effect that certain hiring criteria may have on certain groups over others. Almost every type of hiring criteria has the potential to result in disparate impact. However, if the criteria are job-related and consistent with business necessity, they are not considered discriminatory.
- Job-Related and Consistent with Business Necessity: To meet the business necessity defense, employers should use pre-employment tests that screen for abilities that are job-related and consistent with the needs of the business. For example, administering a Microsoft Excel test to hairstylist applicants would not be consistent with business necessity unless the company can demonstrate that Excel skills are necessary for the job.
Permissibility Under the EEOC
The Equal Employment Opportunity Commission (EEOC) generally prohibits the use of hiring criteria that cause disparate impact, but it allows such criteria when they are “job-related and consistent with business necessity” (EEOC, 2023). This means that businesses must demonstrate that the criteria they use are necessary for the successful functioning of their businesses and that these qualifications are essential to the role.
Disparate Impact and Business Necessity
Disparate impact refers to the disproportionate effect that certain hiring criteria may have on certain groups over others (Criteria Corp, 2023). Almost every type of hiring criteria has the potential to result in disparate impact. However, if the criteria are job-related and consistent with business necessity, they are not considered discriminatory.
Job-Related and Consistent with Business Necessity
To meet the business necessity defense, employers should use pre-employment tests that screen for abilities that are job-related and consistent with the needs of the business (Criteria Corp, 2023). For example, administering a Microsoft Excel test to hairstylist applicants would not be consistent with business necessity unless the company can demonstrate that Excel skills are necessary for the job.
Conclusion
Business necessity is a legal concept that allows employers to use employment criteria that may disproportionately affect a particular group of individuals, provided that the employer can demonstrate that the criteria are job-related and consistent with the needs of the business. The EEOC permits the use of such criteria when they are “job-related and consistent with business necessity,” and disparate impact alone is not considered discriminatory if the criteria are job-related and consistent with business necessity.
References
BambooHR. (2023). What is Business Necessity? Retrieved from https://www.bamboohr.com/resources/hr-glossary/business-necessity
Criteria Corp. (2023). Business Necessity. Retrieved from https://www.criteriacorp.com/resources/glossary/business-necessity
U.S. Equal Employment Opportunity Commission. (2023). Questions and Answers on EEOC Final Rule on Disparate Impact and “Reasonable Factors Other Than Age” Under the Age Discrimination in Employment Act of 1967. Retrieved from https://www.eeoc.gov/regulations/questions-and-answers-eeoc-final-rule-disparate-impact-and-reasonable-factors-other-age
FAQs
What is business necessity in equal employment opportunity?
Business necessity is a legal concept that permits employers to use employment criteria that may disproportionately affect a particular group of individuals, provided that the employer can demonstrate that the criteria are job-related and consistent with the needs of the business.
Why is business necessity allowed by the EEOC?
The Equal Employment Opportunity Commission (EEOC) allows the use of hiring criteria that may cause disparate impact if they are shown to be “job-related and consistent with business necessity.” This means that businesses must demonstrate that the criteria used are necessary for the successful functioning of their businesses and essential to the role.
How does business necessity relate to disparate impact?
Disparate impact refers to the disproportionate effect that certain hiring criteria may have on certain groups over others. Almost every type of hiring criteria has the potential to result in disparate impact. However, if the criteria are job-related and consistent with business necessity, they are not considered discriminatory.
What does it mean for a hiring criterion to be job-related and consistent with business necessity?
To meet the business necessity defense, employers should use pre-employment tests that screen for abilities that are job-related and consistent with the needs of the business. For example, administering a Microsoft Excel test to hairstylist applicants would not be consistent with business necessity unless the company can demonstrate that Excel skills are necessary for the job.
What are some examples of business necessity in employment?
Examples of business necessity in employment may include:
- Educational requirements for certain positions, such as requiring a medical degree for a physician position.
- Experiential requirements, such as requiring a certain number of years of experience in a similar field.
- Travel requirements, such as requiring employees to travel frequently for the job.
How can employers avoid discrimination while using business necessity?
Employers can avoid discrimination while using business necessity by ensuring that the criteria they use are not based on natural or unalterable characteristics of applicants, such as age, sex, race, or disability. They should also ensure that there are no alternative employment criteria that would be less discriminatory.
What is the difference between business necessity and bona fide occupational qualification (BFOQ)?
A bona fide occupational qualification (BFOQ) is an employment qualification that allows employers to hire individuals based on their race, sex, age, or nationality, provided that the qualification is reasonably necessary for the normal operation of the business. BFOQs are similar to business necessities but allow employers to hire based on factors that would not be legally covered by a business necessity.
What are some best practices for employers to avoid disparate impact in hiring?
To avoid disparate impact in hiring, employers should:
- Conduct a thorough job analysis to identify the essential functions of the job.
- Develop hiring criteria that are directly related to the job requirements.
- Validate the hiring criteria to ensure that they accurately predict job performance.
- Monitor the hiring process for disparate impact and make adjustments as needed.