What is Adverse Action in Background Screening?

Updated: Jun 11



The adverse action process is a required element of running background checks on prospective employees when records are found. When there is information on a background report which may have an adverse impact on the hiring decision, § 615 of the Fair Credit Reporting Act states that:

(a) Duties of users taking adverse actions on the basis of information contained in consumer reports. If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall

(1) provide oral, written, or electronic notice of the adverse action to the consumer;


The Adverse Action Process


When a background report on a prospective hire comes back and there is any adverse information contained in it which may affect your decision to hire, you must begin the adverse action process. This is one of the areas where employers can get easily tripped up and find themselves in costly litigation if they do not follow a specific course of action. It is important for employers to develop a procedure and train everyone involved in hiring to ensure this is done correctly and consistently. The process starts with the pre-adverse action notice. Keep in mind the most common type of adverse action is related to hiring, but also applies in other employment decisions like retention, demotion, reassignment, and termination.


Pre-Adverse Action Notice


Though the FCRA allows for oral notice, this is not recommended. Written notice is necessary to ensure compliance with the statute, and in many cases, local fair chance hiring laws. Your policies should reflect your company’s standard practice of issuing the pre-adverse action notice by traditional mail or by email.


This notice should include a statement that information has been found in the background check which may affect the decision to hire. Here is what the FCRA requires in every notice:

(3) provide to the consumer orally, in writing, or electronically

(A) the name, address, and telephone number of the consumer reporting agency (including a toll-free telephone number established by the agency if the agency compiles and maintains files on consumers on a nationwide basis) that furnished the report to the person; and

(B) a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken;

(4) provide to the consumer an oral, written, or electronic notice of the consumer’s right

(A) to obtain, under section 612 [§ 1681j], a free copy of a consumer report on the consumer from the consumer reporting agency referred to in paragraph (3), which notice shall include an indication of the 60-day period under that section for obtaining such a copy; and

(B) to dispute, under section 611 [§ 1681i], with a consumer reporting agency the accuracy or completeness of any information in a consumer report furnished by the agency.


Your CRA will have a procedure for when someone requests a copy of their file or a reinvestigation, you can ask them for a copy of that policy to ensure that the rights of your applicants are being protected.


When you send the pre-adverse action notice, it starts a clock of five working days before you can issue a final decision. Employers should be familiar with local laws as well because some locations require longer than 5 days or have additional requirements related to this time period. This time is intended to give the applicant time to dispute the findings with the CRA that conducted the background check. Employers should also use this time to follow the guidance of the EEOC and conduct an individualized assessment in which you weigh the circumstances and consider if the information found in the report should prevent that person from being hired.


Adverse Action Notice


After the pre-adverse action process is complete, five business days have passed, and the decision has been made not to hire, the adverse action notice must be sent out informing the applicant they will not be hired. Include in this notice the same information you included in the pre-adverse action as described in the FCRA and by the same delivery method. Be sure to keep a record of these notices on file with the background report.


With Integris, you can manage the Adverse Action process from your dashboard, and we will handle the notifications for you. It is all stored securely in our system for your convenience.

 

Shane is the Director of Marketing for Integris. With over a decade of experience in the background screening industry, he holds an advanced FCRA certification from the Professional Background Screening Association.


The information provided is not intended to constitute legal advice and is for informational purposes only. Employers are strongly advised to consult with legal counsel on matters related to the Fair Credit Reporting Act.