OFCCP recently addressed the concept of “practical significance”, and the role it plays in discrimination investigations, in a new section on the agency’s Frequently Asked Questions page. The new FAQs signal a major change in the way that OFCCP will review data to determine whether there is evidence of possible discrimination in hiring and other selection activities.

The purpose of using practical significance in discrimination investigations is to determine “whether an observed disparity in employment opportunities or outcomes reflects meaningful harm to the disfavored group.” (See FAQ 1.)

The concept of practical significance is different from that of statistical significance. Assessing practical significance asks investigators to evaluate the harm arising from a disparity rather than simply focusing on the disparity itself. An assessment of practical significance can be especially important when evaluating differences in selection rates for large data sets, where even slight differences in selection rates can rise to the level of being statistically significance.

OFCCP has stated that a disparity can have practical significance even it isn’t statistically significant, stating:

…just because a disparity is not statistically significant does not necessarily mean that discrimination did not occur. Discrimination cases need not be founded upon a statistically significant disparity. A disparity that does not meet the usual statistical significance standard may nevertheless be compelling if, for example, there is a glaring selection shortfall supplemented with strong anecdotal evidence, or red flags in the company’s EEO compliance.

FAQ 2, Practical Significance in EEO Analysis
OFCCP Frequently asked questions

OFCCP intends to begin considering practical significance during compliance reviews. The agency has stated it will use practical significance as part of a holistic approach to evaluating cases, “along with statistical significance and all other evidence gathered in the course of the investigation” (FAQ 5). This is a significant change for OFCCP, as the agency has almost exclusively relied on tests of statistical significance to determine where it will focus its discrimination evaluations.

To read all of OFCCP’s FAQs on the subject of practical significance, click here.