Ability tests can be exceptional predictors of job performance for job applicants, but a recent settlement by the Department of Labor should spur employers to ensure that such tests do not adversely affect minority applicants, experts say. On July 19th, the Department of Labor announced a discrimination-suit settlement that sent a clear message to employers across the country. That is, if you are going to use testing in the hiring process, you had better know what you are doing or else it will cost you.

“This case illustrates a dilemma in hiring practices facing many organizations,” says Christine Riordan, dean and a professor of management at the Daniels College of Business at the University of Denver. “And, it will only increase as the demographic and ethnic populations of the labor pool change.” The dilemma, she adds, is that while leading psychologists have shown that ability tests (usually written) are exceptional predictors of job performance, use of these tests typically results in adverse impact — meaning employers using these tests are less likely to hire non-Caucasians. Adverse impact, in turn, triggers the interest of various governmental review agencies such as the DOL and Equal Employment Opportunity Commission.