What Does Adverse Action Mean in Employment Screening?

What does it mean when the FCRA talks about adverse action? Learn what constitutes an "adverse" action and see what the law requires your business to do about them.

It's an inevitable event: at some point, your business will encounter a job applicant whose criminal background report contains serious and concerning information. An old and minor disorderly conduct charge might not seem serious, but what about felony convictions for DUI, assault, or other violent crimes? Seeing these details on a background report can give you pause—and it may make you reconsider whether this is a person you want to hire or not.

This experience is what the Fair Credit Reporting Act, or FCRA, defines as an adverse action. An "adverse action" is anything that would lead to rescinding an individual's job opportunity. Why does that terminology matter?

Under the FCRA, businesses must meet key responsibilities to comply with the law while using background checks. You cannot unearth a negative record during employment screening and immediately decide to decline the candidate—that would be a potential violation of the law. What do you need to do to build a process that works as the law intends?

Pre-Adverse Action: The First Step

The first key term to know is "pre-adverse action," specifically the "pre-adverse action notice." Let's return to the previous example, where an employer identifies a serious felony assault conviction while screening a candidate. Naturally, this requires more consideration and could be a barrier to employment with the company. 

Under the FCRA, job applicants have a right to receive a "pre-adverse action notice." This is a letter informing the individual that you have identified information of concern on the background report and that you may choose to withdraw your job offer as a result. This notice, by law, must contain a copy of the background check report you've used to make your decision.

Taking Adverse Action: What Happens Next?

Once you've issued your pre-adverse action notice, you must begin a waiting period to allow the applicant time to review their background check. The applicant may, at this time, choose to withdraw themselves from consideration voluntarily. However, they also have the right to provide additional details for your review. This may include more information on the circumstances of the conviction, evidence of rehabilitative work, or even an outright dispute of the accuracy of the record. You must give applicants a "reasonable amount" of time to respond. Current best practices typically use a waiting period of five business days minimum.

After your chosen waiting period elapses and you have reviewed any further information, you may make a final decision. If you decide to rescind the job offer after reviewing any additional materials provided, you must issue a final "adverse action" notice that explains the decision, informs the applicant of where their report originated and also explain that candidates have a right to dispute the decision. You've fulfilled your regulatory responsibilities and can continue assessing other candidates at this stage.

Keep in mind that adverse action requirements can kick in after hiring, too. If you have an individual seeking a promotion or transfer through a formal application process, adverse action notices are necessary if a new background check reveals concerning information.

Building a Safe, Compliant Notification Process

Staying on top of all the rules and regulations surrounding employment screening isn't always easy. Providing adverse action notices can be tedious and time-consuming when carried out manually. However, with support from our robust background check products, businesses can automate the process of emailing candidates the relevant notices and information with just a few clicks. When you can easily ensure compliance with this critical FCRA regulation, you can better streamline your hiring process without unnecessary risks. Explore these solutions today to see how much simpler compliance can be.

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Michael Klazema

About Michael Klazema The author

Michael Klazema is the lead author and editor for Dallas-based backgroundchecks.com with a focus on human resource and employment screening developments

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