10 FCRA Adverse Action Dos and Don’ts

When you’re considering denying employment as a result of a background check, your adverse action process takes over. The Federal Fair Credit Reporting Act (FCRA) requires that employers follow a process that begins before a final decision is made. Its intent is to protect candidates and employees from unfair employment-related decisions.

To help you, here are some common dos and don’ts of adverse action:

1. DO include both the pre-adverse action and adverse action notices

Remember that the adverse action process starts when you receive a background report from a consumer reporting agency that is a factor or the entire reason for your decision to exclude the individual subject of the report. That triggers the mandated FCRA adverse action requirements, which include a pre-adverse action notification, a waiting period to allow the individual to respond, explain, or refute, an individualized assessment, and a subsequent notification of adverse action.

2. DON’T take adverse action before you complete the entire process

Keep the job open until you have completed the adverse action process. It is possible that mitigating information will emerge at one of the steps that might reverse a negative decision.

3. DO fully inform the applicant during pre-adverse action

Immediately following your receipt of a report that may disqualify an applicant or employee, initiate the pre-adverse action process with complete information. Your obligation at this point is to make sure the applicant understands that they might be excluded based on the background report and allow them time to respond.

4. DON’T try to consolidate information or notices

The rules require various notices and specific content. For example, you must provide a disclosure and get an applicant’s authorization to do a background check in writing in stand-alone documents. Employers’ failure to do so has resulted in lawsuits. The details matter.

5. DO include applicable city and state notices, such as Ban the Box

The proliferation of Ban the Box laws in state and local jurisdictions adds another layer to the adverse action process for many employers. Since the requirements in these laws may be different than national law, you need to find out what applies in your location and make sure the hiring process reflects it.

6. DON’T fail to inform the applicant about his or her rights

At several points in the process, you are required to inform the applicant about the background report, how you acquired it, from whom, how they can get a copy, and what legal recourse they might have if they disagree with your decision.

7. DO make individualized assessments if a criminal background may exclude a person

One of the most important aims of adverse action rules, including guidelines from the Equal Employment Opportunity Commission (EEOC), is to make sure that applicants are only excluded for reasons that are relevant to the job in question and for which you have a legitimate business necessity to exclude them. Making this determination may require you to perform an individualized assessment.

8. DON’T rely on general “blanket” classifications to exclude

A main objective of the EEOC Guidance is to stop the practice of using blanket exclusion criteria, e.g., refusing all applicants with any felony conviction. Such practices are often found to be discriminatory and can lead to lawsuits.

9. DO give the applicant ample time to rebut or provide mitigating information

If an applicant subject to adverse action wants to dispute the decision, it will take him or her time to find and transmit the information. You must give a reasonable amount of time to do that, usually at least 5 business days, but under some local laws, it is up to 10 days. There has to be a meaningful opportunity to rebut.

10. DON’T rely on verbal information in taking adverse action

Each step in the process should be documented in writing. You cannot point to a spoken conversation if you are engaged in a dispute or lawsuit.

How well do you understand the adverse action process? Do you know how to guide your applicant through it? For more information on adverse action and compliance best practices, download our new guide, A Practical Guide to FCRA Adverse Action in Hiring.

About Michael Gaul

Michael is a results-oriented marketing executive with over two decades of experience in employment screening, physical security, and business process management. Michael has deep experience in human capital risk management and a passion for educating business leaders and HR professionals on strategies that tangibly protect their interests. Michael serves on the Board of the Secure Cash and Transport Association (SCTA) and is a member of the National Association of Professional Background Screeners (NAPBS), and the American Society of Industrial Security (ASIS).
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