Adverse Action Notice Requirements

Following the law for background checks.

What Is Adverse Action?

adverse-action-img.png

When you use background checks to make employment decisions, including hiring, retention, promotion or reassignment, you must comply with the Fair Credit Reporting Act (FCRA).

Employment background checks are also called consumer reports and can include information from a variety of sources, including employment credit reports, criminal records and professional license verifications.

Adverse action refers to an official legal process that an employer is required to follow as you inform a job candidate or employee that they are not eligible to work for your company due to information found in their background check.

How to Legally Pursue Adverse Action in 5 Steps

GoodHire recommends all employers to consult with legal counsel to develop a legally compliant adverse action policy.

1
Before You Run A Background Check

Before You Run A Background Check

Before running a background check from a Consumer Reporting Agency (CRA), you must inform the candidate or employee. The notification must stand alone and cannot be hidden within an employment application. In other words, the notification absolutely cannot have a release of liability included. Employers may give a brief description of the nature of the background check, but cannot distract from the written notice or use additional text to confuse the message.

In addition to the notification, employers must obtain written permission from the candidate or employee. Without explicit consent, employers are not authorized to obtain any information. And, you must be able to certify that the candidate or employee was notified and provided consent, in addition to compliance with FCRA requirements and that you will not misuse the information or discriminate against the candidate based on state or federal equal opportunity laws.

Download Federal Adverse Action Employer Forms

2
Pre Adverse Action Notice

Pre Adverse Action Notice

Before you reject a job candidate, reassign or terminate an employee, or deny a promotion, you must provide the individual with a pre adverse action notice and a copy of the background check results that led to your decision.

In addition, you are required to provide a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act,” which is usually supplied by the third-party company that delivered the results.

3
Review Results Again

Review Results Again

Employers must also give the applicant or employee the opportunity to review the background check results and determine whether the information is correct. While the FCRA does not clearly state how long employers must wait after providing pre adverse action, current recommendations from the FTC (the organization who enforces FCRA regulations) are that employers should “keep in mind the clear purpose of the provision to allow consumers to discuss reports with employers or otherwise respond before action is taken.”

The FTC suggests that five business days is a reasonable amount of time.

4
Provide Notice of Adverse Action

Provide Notice of Adverse Action

After an approximate five-business-day waiting period, you can proceed with adverse action. Employers are legally required to provide an official oral, written, or electronic notice to the candidate or employee. The notice should include the name and address of the consumer reporting company along with a statement that the adverse action is based on information returned in the background check.

You must also provide a statement that the company that delivered the background check results did not make the decision and cannot give specific reasons for the adverse action.

Lastly, the employer needs to include a notice of the candidate or employee’s right to dispute information found in the background check. The notice should state that the applicant or employee has the right to obtain another free copy of their background report within 60 days.

5
Dispose of Sensitive Documents

Dispose of Sensitive Documents

The FCRA requires that you securely dispose of the background check results, including any information that has been gathered in the process, once you have completed this process. According to the FTC, burning, pulverizing, or shredding of paper documents are appropriate methods of disposing sensitive documents and information. Electronic information should be completely destroyed, so that it cannot be retrieved or reconstructed.

Ultimate Guide to FCRA Compliance

Checklists and guidance to help you stay on the right side of changing background check laws.

Talk To Our Sales Team

Our in-house compliance expertise is unparalleled. Find out what else we can do for your business. If you’d like to explore our product or order background checks, you can sign up for free today.