Background checks are to be expected as a normal part of applying for a new job. In fact, in some cases, they are part of keeping a job as well. The relatively easy availability of personal information online coupled with an increased drive to mitigate overall enterprise risk has led more and more organizations to adopt comprehensive background screening policies. 

With the rise of background checks has naturally come a rise in the number of individuals denied employment, called an adverse action, due to information obtained during a background investigation. The Fair Credit Reporting Act (FCRA) and the Equal Employment Opportunity Commission have developed regulations to protect against discrimination, unfair hiring practices, and unjust use of personal information. The following are a few important things you need to know about background screening adverse actions:

What is an Adverse Action?

In the hiring process, an Adverse Action is when a company considers not hiring an applicant based on information gleaned from a background check report. It’s important to understand that the first step of an Adverse Action is considering the adverse action; the final adverse decision comes later in the process. Adverse Action regulations apply only to potential new hires that do not work for the company and that may or not already have been extended an employment offer. 

What Steps are Involved in an Adverse Action?

Adverse Actions involve two steps.

Step 1: Notice of Pre-Adverse Action

This letter gives the applicant notice that they may not be hired for a position as a direct result of the background check. This is NOT a final decision letter, only notice of consideration. A compliant pre-adverse action letter must contain the following:

  • A clear statement informing the applicant that adverse action is being considered.
  • A copy of the background check report 
  • Instructions for contacting the reporting service if the individual has questions or would like to dispute the findings. 
  • A summary of the applicant’s rights.

Pre-adverse action notice gives applicants time to dispute findings and make corrections. The background check system is not perfect and often records are incomplete or do not match. 

Step 2: Final Adverse Action

Employers can move onto step 2 only after step 1 is complete and the candidate has been given ample time to make corrections and disputes. Once the employer has received an updated and corrected report, they are able to make a final employment decision. If the decision is to decline employment or withdraw an offer, they must issue a final adverse action notification that includes the following:

  • A clear statement informing the applicant of the adverse decision. 
  • A final copy of the background report.
  • A copy of “A Summary of Your Rights Under the Fair Credit Reporting Act” plus any state or local information requirements.

If the revised and corrected report resolves the issues, then the final decision is to move forward with hiring. In these cases, no additional notification is necessary. 

Stay Compliant

Adverse Actions involve specific legally defined steps. Always have your legal counsel review your policies and work with a reputable background check service provider who will help you remain compliant.