Whenever an employer uses a background check to make a decision that is not in favor of the applicant, the employer is taking Adverse Action and must follow certain rules to maintain compliance.
Please note: depending on where you operate or where your applicant resides, you may be required to meet local Adverse Action regulation, such as the New York City Fair Chance Act Notice. Local laws may require employers to make a conditional offer of employment before conducting a background check, which you will need to factor in to your Adverse Action Policy.
The Purpose of Adverse Action
The FCRA outlines the requirements for taking adverse action to accomplish three primary goals:
- Inform the applicant of their rights under the FCRA
- Ensure the applicant knows adverse action was taken based all or in part on the results of a background report
- Allow the applicant to review the background report and dispute any inaccuracies.
Inherent in the adverse action process is giving the applicant the ability to correct inaccurate or incomplete information that could influence your decision to continue with an offer of employment. This is the most important goal of adverse action, offering protection for the employer and the subject of the background report.
The Adverse Action Process
Adverse Action has three stages:
- Pre-Adverse Action Letter
- Post-Adverse Action Letter
The Pre-Adverse Action Letter informs the applicant that an employer is going to take adverse action. Similarly, the Post-Adverse Action Letter advises the applicant that the final decision not to pursue employment has been made.
Waiting phase of Adverse Action
How long an employer must wait is defined as a “reasonable amount of time.” Some employers have been found liable for FCRA violations when they took final action in less than four business days. However, some courts have ruled ten business days is reasonable. Local laws tend to be the best indicator of how long you should wait so be sure to investigate these when establishing your policy.
What happens during the waiting phase of Adverse Action? Often times, nothing. Sometimes, a dispute could be filed. If the applicant identifies anything inaccurate or incomplete on their background check, they have the right to file a dispute with the Consumer Reporting Agency, CRA, that provided the report. The CRA then takes steps to verify the information and issue amendments to the report as appropriate.
It is the employer’s discretion as to what should be done while a dispute is in progress, such as proceed with taking final action regardless, wait until the dispute is complete, or make a conditional offer of employment. It is important to consult with an employment attorney and to have a clearly written policy on how you handle disputes during Adverse Action.
What is included in Adverse Action Letters
Pre- and Post-Adverse Action Letters have the same four components, as listed below.
- A letter stating adverse action has or will be taken that advises the applicant the employer made the decision (not the CRA) and provides the CRA’s contact information.
- A copy of the applicant’s Summary of Rights Under the FCRA
- A copy of the applicant’s background report
- A dispute form
The only difference is the Pre-Adverse Action Letter advises an applicant that you plan to deny employment and the Post-Adverse Action Letter advises you have made a final decision. Although not required by the FCRA, some local laws require employers to specifically inform an applicant why adverse action as taken.
Adverse Action Letter Services
Choice Screening helps our clients remain compliant when taking Adverse Action by offering Pre-Adverse Action and Post-Adverse Action services that are routinely audited and overseen by our internal Compliance Director. Click here for more information on Adverse Action Letter Services.
One of the keys to Adverse Action Compliance is to ensure consistent practice every time adverse action is taken. Considering all the information we just covered, it’s apparent that a clearly written policy is extremely important.
It is the recommendation of Choice Screening to consult an attorney or qualified personnel familiar with local legislation to ensure you are meeting all federal and local Adverse Action standards. As we are not attorneys here at Choice, we cannot provide legal advice.