Adverse Action Notices: What You Need To Know

If your potential employer is using background checks in order to find potential employees you need to be aware of the laws and regulations which affect the industry. Employers might use the results of your background screening for either hiring, promoting, suspending or even terminating employees.

What is Adverse Action?

So, what is adverse action exactly?

It has been defined by the Fair Credit Reporting Act (FCRA) as a denial of employment or other employment decision based either in part or in whole on a consumer report which can affect prospective or current employees.

Before the job applicant is denied the role or promotion, reassigned or terminated, employers must follow a two-step adverse action process including the pre adverse action notice and an adverse action notice. The process allows for the employee or applicant to review and dispute the information found in the report if they wish. It is vital for the employer to follow the process correctly so that both the organization and the rights of the employee or applicant are looked after.

According to the Mighty Recruiter, an adverse action occurs when “an employer behaves in a way that puts an individual or a group of people at a disadvantage as far as equal employment opportunities go. For example, take an employee who files a lawsuit against his or her employer. If the employer retaliates by refusing to move ahead with a planned promotion for the employee, that behavior is likely an adverse action. In addition, federal courts in recent years have heightened their scrutiny of employer adverse actions under the Fair Credit Reporting Act. Under this act, employers are required to follow specific procedures such as pre-adverse action notices in situations such as using a background check or credit report to deny employment to a person based on the findings of the report.”

The Fair Credit Reporting Act is a federal statute that was established in order to promote the fairness, accuracy, and privacy of consumer information. According to the FCRA, a Consumer Reporting Agency (CRA) is “any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.”

What is a Pre Adverse Action Letter?

If you have been asked to comply with a background check and since then have received a pre adverse action letter, you might be wondering what that is.

The letter is to notify you that the company in question may not hire you due to specific information that has shown up on your employment background check. Many third-party background check companies will allow clients to send the pre adverse action letters via email, but you might also receive one in the mail.

It is important to remember that this letter is not the final decision about employment. A pre adverse action letter has to contain the following information:

• A declaration which advises the applicant that adverse action is being considered
• A copy of the background check report which has caused the employer to consider adverse action
• Instructions as to how to contact the consumer reporting company should the prospective employee have questions or if they wish to dispute the claims
• A summary of applicant rights according to the FCRA

The pre-adverse action notice is important so as to give the applicant enough time to dispute the findings on the background check. Sometimes there might be record matches that occur that are not the applicant’s record causing disinformation. The notice allows the applicant to dispute any of the claims found on the report before the company makes its final decision.

So, how much time, according to the FCRA is reasonable? The FCRA has not defined exactly how much time and organization much give you, but the Consumer Financial Protection Bureau (CFPB) says that a minimum of five days is reasonable, while some courts claim that ten working days is better. You need to check with your own state, county or municipality as some will have laws that dictate a certain timeframe.

Once again, providing reasonable time to dispute the background check is necessary so that the applicant can establish that there is inaccurate information found in the background check. You, as the potential employer, have the opportunity here to provide evidence that the information is incorrect. If you are otherwise qualified for the job, you should not be subjected to adverse action for employment purely based on the wrong information that was found on your background screening.

How to Dispute the Information on the Background Screening Report

If you have applied for a position, gone through the interview process only to receive a pre-adverse letter in the mail and wish to dispute it, you can follow up with the consumer report company to do so. Your first step is to find out which company completed the background check so you can determine who you need to get into contact with.

Most companies will walk through the points of the report with the applicant, hear them out and then reinvestigate their findings, whether over the telephone or online. It is important to have a copy of the report with you when you make the dispute and remember that consumer reporting agencies are unable to remove adverse records which were discovered from your past, but can only investigate what they have been provided with by the courts.

This investigation can take time, depending on what the applicant’s concerns are, but the background check company will usually provide both the employer and the employee with an updated consumer investigative report.

You should know that when refuting the information found on the report you need to have proof as stated by law. If you cannot offer any proof and your prospective employer doesn’t find your explanation sufficient, your application can still be rejected. You should file a dispute with the CRA and any claims of inaccuracy will be investigated by the CRA. Any errors which might turn up will be updated on your background check.

The CRA has a total of thirty days to investigate your claims, but the FCRA does not require the employer to await the completion of the investigation before continuing with the adverse action process. All employers are advised to consult with attorneys before rejecting any applicant that has an open dispute, as this has been a reason for filing legal action of late.

What is a Final Adverse Action Notice?

If the employer has considered your response as well as any corrections made to your record but still decides not to hire you based on the information on the rest of the background check, they must send you an adverse action notice explaining that decision. This notification can either be sent in the post or electronically.

Until this step is taken no decision has been made as to whether the applicant has been hired or not. If the employer still doesn’t select you for the position the final adverse action letter must contain the following information:

• A statement that advising the application about the adverse decision. This will include a statement where the applicant in question will not be hired, that the offer has been withdrawn, or id they are being terminated
• Included should be the final copy of the Investigative Consumer report
• A copy of the applicants’ rights as well as any other state requirements

The adverse action letter should also offer you the chance to receive another copy of your background check within 60 days of getting the notice. If the prospective employer got a third-party company to complete the background check, the letter should also specify that the hiring decision was in fact made by the employer, not the company conducting the screening. It should also include the name, address, and phone number of the employment background check screening company.

It is also required by the FCRA that the employer disposes of the background check results securely. This means that any physical copies must be either shredded or incinerated. Digital copies will have to be irretrievably erased.

Remember that it is illegal to check the background of applicants and employees when such a decision is based on things like:

• Sex
• Color
• Disability
• Genetic information
• Race
• National origin
• Religion
• Age

According to the US Equal Employment Opportunity Commission:

‘Employers performing background checks to screen applicants or employees may attempt to search these governmental sources themselves or conduct a simple Internet search, but they often rely on third-party background screening businesses. Businesses that sell criminal history information to employers are “consumer reporting agencies” (CRAs)42 if they provide the information in “consumer reports” under the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. (FCRA). Under FCRA, a CRA generally may not report records of arrests that did not result in entry of a judgment of conviction, where the arrests occurred more than seven years ago. However, they may report convictions indefinitely.

CRAs often maintain their own proprietary databases that compile information from various sources, such as those described above, depending on the extent to which the business has purchased or otherwise obtained access to data. Such databases vary with respect to the geographic area covered, the type of information included (e.g., information about arrests, convictions, prison terms, or specialized information for a subset of employers such as information about workplace theft or shoplifting cases for retail employers), the sources of information used (e.g., county databases, law enforcement agency records, sex offender registries), and the frequency with which they are updated. They also may be missing certain types of disposition information, such as updated convictions, sealing or expungement orders, or orders for entry into a diversion program.’

Background Checks Regarding Criminal Records

If you fear that you might not be selected for the position based on something that has occurred in the past, it is always the better option to be upfront with your potential employer. Think about it like this. If you were hiring, would like to hire someone who might have made mistakes in the past, but has worked on themselves in the meantime and is honest about what happened, or hire someone covering up their past mistakes?

You should know that not all elements of a criminal background check will have the same bearing on your possible employment. For example, the fact that you may have been arrested in the past should not reflect on your hiring. According to the US Equal Employment Opportunity Commission, this is why,

“The fact of an arrest does not establish that criminal conduct has occurred. Arrests are not proof of criminal conduct. Many arrests do not result in criminal charges, or the charges are dismissed. Even if an individual is charged and subsequently prosecuted, he is presumed innocent unless proven guilty.

An arrest, however, may in some circumstances trigger an inquiry into whether the conduct underlying the arrest justifies an adverse employment action. Title VII calls for a fact-based analysis to determine if an exclusionary policy or practice is job-related and consistent with business necessity. Therefore, an exclusion based on an arrest, in itself, is not job-related and consistent with business necessity.

Another reason for employers not to rely on arrest records is that they may not report the final disposition of the arrest (e.g., not prosecuted, convicted, or acquitted). As documented in Section III.A., supra, the DOJ/BJS reported that many arrest records in the FBI’s III database and state criminal record repositories are not associated with final dispositions. Arrest records also may include inaccuracies or may continue to be reported even if expunged or sealed.”

Convictions, on the other hand, are a completely different story.

“By contrast, a record of a conviction will usually serve as sufficient evidence that a person engaged in particular conduct, given the procedural safeguards associated with trials and guilty pleas. However, there may be evidence of an error in the record, an outdated record, or another reason for not relying on the evidence of a conviction. For example, a database may continue to report a conviction that was later expunged or may continue to report as a felony an offense that was subsequently downgraded to a misdemeanor.

Some states require employers to wait until late in the selection process to ask about convictions. The policy rationale is that an employer is more likely to objectively assess the relevance of an applicant’s conviction if it becomes known when the employer is already knowledgeable about the applicant’s qualifications and experience. As a best practice, and consistent with applicable laws, the Commission recommends that employers not ask about convictions on job applications and that, if and when they make such inquiries, the inquiries be limited to convictions for which exclusion would be job-related for the position in question and consistent with business necessity.”

Does the Adverse Action Mean You Will Not Be Hired?

Not necessarily. Sometimes adverse employment actions are specific to terminations or refusing to transfer or promote someone. Sometimes, the employer might be looking at placing employees in certain positions who need to meet specific clearance requirements. While the applicant in question might not meet those particular requirements, they could still have the right qualifications for other positions.

The adverse action doesn’t mean that you are refusing to be hired at all, it just means that you will not be hired to the original position that you were considered for.

Conclusion To Adverse Action Meaning

While it might not be your favorite letter to receive in the mail, particularly after you have undergone the complete hiring process, from the application, through to the interviewing process and the background check, an adverse action notice is not the end of the world.

You should always review the copy of the background screening report and check it carefully to make sure it represents your history precisely. If you find any inaccuracies within the report, you should try your best to find evidence to dispute these claims which have led to your potential employer changing their mind about you. This includes things like legal documents as well as using references who can attest to your claims and correct the errors.

Many background check companies will allow you to communicate with them online, so you can send any documents or other information digitally in hopes of clearing up any discrepancies.

If your background check comes up with past criminal offenses, you should communicate with your potential employer and address those issues directly.

The best way to go about this is not to make excuses for your past mistakes, but rather acknowledge them and attempt to explain how you have learned and grown from them. Also, explain how those same mistakes will not prevent you from effectively carrying out your potential role in their company.

If you have had your application turned down, even after your response to the pre adverse action letter, you should review your rights and see whether you have been treated in accordance with the law.