In today’s competitive job market, employers rely heavily on background checks to make informed hiring decisions. However, the process of conducting these checks must adhere to strict regulations outlined in the Fair Credit Reporting (FCRA), a federal consumer protection statute. One critical aspect of FCRA compliance is understanding adverse action and its implications for employers, employees and job candidates.
WHAT IS ADVERSE ACTION?
Adverse action refers to any negative decision an employer takes based on information obtained from a consumer report. This action can include rejecting a candidate, denying a promotion or transfer, terminating an existing employee, or any other decision that adversely affects an individual’s employment status. Adverse actions typically stem from findings in background checks, such as criminal records, credit history or employment verification discrepancies.
The FCRA mandates specific procedures employers must follow when adverse action is considered based on information obtained from a consumer report. Compliance with these procedures is crucial to protect the rights of job applicants and ensure fair treatment throughout the hiring process.
WHAT HAPPENS WHEN A BACKGROUND CHECK UNCOVERS SOMETHING THAT WOULD NEGATIVELY IMPACT A PERSON’S EMPLOYMENT?
Sometimes, when considering a candidate for employment, you may come across information on a background check that may raise concerns. If this leads to a decision that would negatively impact the individual’s employment, you must follow the prescribed adverse action procedures.
When taking adverse action, it’s important to help individuals who have been negatively impacted by a background check understand their rights, the company’s obligations, and the process for making a final decision.
PRE-ADVERSE ACTION PROCESS
Before taking adverse action against a candidate, employers must adhere to the pre-adverse action process outlined in the FCRA. This process involves several key steps:
Notification
If an employer relies on any information in a background check report to potentially reject a candidate, it must first provide the individual with a written pre-adverse action notice letting them know their application is under reconsideration. The notice must identify the background check company that prepared the report and include contact details along with instructions to contact the screening company to dispute any information the individual believes is either inaccurate or incomplete. Along with the pre-adverse notice, the employer must include a copy of the consumer report and a document entitled A Summary of Your Rights under the FCRA. This notice gives the individual an opportunity to review the report and address any inaccuracies before a final decision is made.
Waiting Period
The FCRA does not specify a specific waiting period before employers can take final action, but the Federal Trade Commission, the federal agency which enforces the FCRA, has previously communicated that five business days is a reasonable amount of time to allow a consumer, the subject of the report, to receive their notification by mail and have the chance to respond. Depending on their state or city, an employer may be subject to different waiting periods before a final decision can be issued. If an employer has not heard back from the applicant or the background check company that the consumer wishes to dispute their report, it can proceed with taking the final adverse action.
Dispute And Reinvestigations
In the event a consumer contacts the background check company and disputes information in their report, your screening firm should notify you of that dispute. If this occurs, the five-day timer is paused, and you should not proceed with a final decision until the re-investigation is complete. This ensures you rely on the most accurate and up-to-date information to base your final decision.
If the reinvestigation results in an amended report that may remove a previously reported criminal record or other negative information, you can now base your final decision on a more accurate report. And, if the screening company confirms its original reporting and nothing in the report changes, you can proceed confidently to your final adverse decision if you still wish to reject your candidate.
FINAL ADVERSE ACTION PROCESS
If the employer decides to take adverse action after the waiting period has elapsed, they must follow the final adverse action process as outlined in the FCRA:
Adverse Action Notice
The employer must provide the individual with a written adverse action notice which informs them of the adverse decision and explains that it was based on information in the consumer report. This notice also includes information about the individual’s right to dispute the accuracy of the information in the report. Depending on any applicable state or jurisdictional laws, an employer may also need to include other specific information in either the pre-adverse or final adverse notices or both. It’s critical for employers to work with counsel to determine any additional legal requirements.
Disclosure of Consumer Reporting Agency
Additionally, the adverse action notice must include the name, address, and phone number of the consumer reporting agency (CRA) that provided the report. This allows the individual to contact the CRA directly to dispute any inaccuracies or obtain a free copy of their report within 60 days.
NEED HELP WITH YOUR ADVERSE ACTION PROCESS?
Adverse action is a disappointing outcome for both the candidate who was hoping to be hired and the employer who was looking to gain a valuable employee. It’s important to remember that employers have a duty to establish a safe and productive workforce, while employees have a duty to serve the best interests of the organization. Striking the right balance sometimes requires employers to make tough decisions based on a background check.
Shield Screening can help with your adverse action process to meet FCRA compliance. Contact us today to learn more about these and other services.
