Leveraging background checks during the hiring process can help employers make smarter hiring decisions. In fact, background checks play such an essential role in the hiring process, that there are laws governing how employers should perform them.
While everyone wants hiring to go smoothly, sometimes a pre-employment background check reveals a criminal history that is incompatible with the position you are hiring for. In these cases, you may choose to deny an employment offer to an applicant.
When that happens, though, you, as an employer, cannot simply revoke an employment offer without notice. Instead, you must follow a predefined adverse action process.
In this post, we’ll discuss the adverse action process and how abiding by it can help protect your company and your hiring practices against legal liabilities.
What is Adverse Action?
When it comes to background checks, adverse action is any action you as an employer take (based on the information revealed in a pre-employment background check), which adversely affects an applicant’s employment possibilities with your company. Examples of adverse action include denying a candidate’s employment application or offering employment in a lesser position.
Because adverse action negatively impacts consumers, it often leads to litigation. To minimize the risk of litigation and non-compliance for your company, and to protect consumers, the Fair Credit Reporting Act (FCRA) has established a set of procedures all companies must follow if they choose to take adverse action of any kind against an applicant.
The Adverse Action Process: 3 Steps to Follow to Stay Compliant
Step 1. Pre-Adverse Action
If a pre-employment background check uncovers information that leads you to decline a job applicant, you must provide the applicant with a written notice, i.e., a pre-adverse action letter. The pre-adverse action letter can be delivered via electronic or hard copy form.
Its purpose is to inform the applicant that you will not hire them for the position based on information uncovered in the background check. Along with this letter, you must provide the candidate with a copy of the background check along with a copy of the “Summary of Rights under the FCRA” form.
When a candidate receives the pre-adverse action notification, they have the right to ensure their information on the background check is correct and contest any inaccurate data.
Step 2. Waiting Period
The FCRA requires that you wait “a reasonable amount of time” before sending your official adverse action letter to your applicant. We recommend waiting a minimum of five working days before sending your official adverse action letter to your applicant. This helps ensure the applicant has enough time to dispute any discrepancies found in the report.
Step 3. The Adverse Action Notice
If, after the candidate has issued a response to the pre-adverse action letter and requested necessary corrections to their background check document, you still decide that you will not hire the candidate based on the contents of a background check, you must issue an official adverse action notice, which explains your decision in full. This notice can be delivered digitally or as a hard copy.
This adverse action notice must:
- Include a summary of the applicant’s FCRA-protected right to dispute the accuracy or completeness of the background check’s findings directly with the agency that performed it.
- Provide notice of the adverse action to the consumer.
- Provide the consumer with contact information for the CRA that prepared the report.
Once you’ve done this, the FCRA requires that you dispose of background check results securely. This means shredding or burning paper copies and erasing digital copies permanently.
Pro tip: If you want to simplify the adverse action process, iprospectcheck can help. Our technology can automate the Adverse Action notification delivery processes for you.
I received a Pre-Adverse Letter– What Should I do Now?
If you are a candidate and received a pre-adverse letter from your potential employer, keep these tips in mind:
- Check the report to make sure it’s accurate.
- Make a note of any inaccuracies you find in the report. Gather any evidence you have, including personal references and legal documents, that will help you resolve errors.
- Contact the employer to determine how you should deliver your information – via email or in the form of a hard copy.
- If the report accurately details your past criminal history or convictions, address those points directly:
- Be honest about your mistakes.
- Explain to your employer what you learned from the experience, and why your past will not prevent you from thriving in the new position.
- If you’ve obtained new training or skills, consider describing how you’d use them in the position.
- Consider including this information in a personal note, which could reestablish your line of communication with the employer.
While the law requires the employer to include a summary of your rights as an applicant in any pre-adverse action notices they issue, it’s wise to educate yourself about your rights, as well. You may also have additional rights under fair chance or ban-the-box laws, which seek to limit hiring discrimination against people with past convictions or arrests.
If the employer denies your application, even after you’ve responded to the pre-adverse action notice, you can review your rights one final time. If you believe the employer treated you unlawfully, you have the right to dispute the decision. If the employer followed the law, though, you have no choice but to accept the decision.
The Small Business That Tried to Skip Adverse Action, and Why It Mattered
Many small business owners underestimate the importance of Adverse Action, assuming it’s a formality meant for larger companies. The real case below shows how skipping it almost cost one fast-growing business far more than time.
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Early in our company’s history we met a small business owner who was overwhelmed by growth, pressed for time, and juggling every part of the hiring process. When a background report returned with a criminal record, he explained that he planned to sidestep the Adverse Action process entirely. His plan was simple. He would tell the candidate that he had already filled the job and moved on thus avoiding a difficult discussion.
He was not malicious. He was not trying to hide anything. He just did not understand the gravity of the requirements of the FCRA. Like many small businesses, he believed that formal legal procedures were something only large corporations had to worry about. He saw the process as red tape.
We walked him through the law and the risk. The Adverse Action process exists so that candidates have a fair chance to correct inaccuracies, provide context and be treated with basic transparency. Countless lawsuits have shown what happens when this step is skipped. The moment an employer makes a decision that is even partly influenced by information in a background report, the protections of the FCRA activate. Notice. A copy of the report. A summary of rights. A reasonable opportunity to respond. These steps are not technicalities. They are consumer protections designed to prevent wrongful denials of employment.
To his credit, he listened. We gave him the tools to automate the entire process so he would not have to manage it manually. He implemented it immediately and never looked back. That decision turned out to be a turning point for his company. He avoided the legal exposure that has taken down many businesses. He built hiring practices that scaled with his company. That same client has grown exponentially. He is successful, respected, and grateful that we guided him away from a mistake that could have cost him far more than time.
The Adverse Action process serves a purpose that is bigger than compliance. It protects fairness in hiring. It gives applicants a moment to be heard. It reduces the chance that an employer acts on incomplete or inaccurate information. When done correctly, it also strengthens trust between employers and candidates. People respond differently when they feel the process is honest and transparent.
For consumer reporting agencies, it is impossible to ignore the legal and reputational risk that comes from a client refusing to follow Adverse Action requirements. CRAs are named in lawsuits when the process is ignored. They are asked to explain their role. They are expected to uphold industry standards. A responsible CRA must insist that clients follow the law because the law is clear and the alternatives are costly.
In the hiring world, compliance does not slow business down. It protects its ability to grow. This client is living proof. He started as a small operation that saw compliance as a burden. Today he is a thriving enterprise that sees it as a foundation. We are proud to have helped him make that shift and proud of the many years of partnership that have followed.
Is Your Adverse Action Program Compliant?
If your company is not following these procedures, we highly suggest you work with legal counsel to update your policies as soon as possible. Companies that administer proper adverse action procedures can minimize risk and keep the process fair, respectful, and objective. By working with a reputable, knowledgeable background screening company, you can ensure compliance. Contact iprospectcheck and learn how we can simplify compliance for you.
DISCLAIMER: The resources provided here are for educational purposes only and do not constitute legal advice. Consult your own counsel if you have legal questions related to your specific practices and compliance with applicable laws.
