How Employers and Applicants Should Handle Adverse Action

If a company is running a background check for the permissible purpose of employment and the background check results lead an employer to reject an applicant or dismiss an employee, the employer is required to tell the applicant through an adverse action notice. Should you ever encounter this situation in your hiring, it’s important to understand and be prepared for your responsibilities as you pursue adverse action—as well as the rights of the applicant. 

According to the Fair Credit Reporting Act (FCRA)—adverse action is taken when an employer removes an applicant or employee from job eligibility due to the results of a background check. The FCRA has strict rules regarding adverse action to protect the applicants and hold the employers accountable. Employers who improperly take adverse action can face fines and even unfair-hiring lawsuits.

So how can you be certain that you are following adverse action protocols properly? There are a few key steps to remember in order to remove an applicant from consideration while protecting yourself from legal trouble. If you decide you want to take adverse action, here’s what you must be sure you do:

1. Notify the individual and share the background report: As soon as you know you may take adverse action, you must notify the applicant of your intent with a pre-adverse action letter. One Source can help you prepare this letter. Keep a record of the letter itself, any attachments, and the date you sent it. With the letter, you must send a copy of the background check and a copy of their FCRA rights.
2. Allow time for them to respond: Hang tight for a bit while the applicant reviews the background report. They have the right to address any potentially inaccurate information or clarify the points of contention on their record. The FCRA advises waiting a “reasonable amount of time”. A common practice is to wait five business days.
3. Take another look: Consider the applicant’s response to your pre-adverse action notice. Did any information on their report get corrected? Did the applicant provide context that changes your understanding of their report? Look over the report one more time and see if you would still like to take adverse action. If you want to move forward with adverse action, you will have to prepare another letter to notify the applicant of your decision.
4. Properly inform the applicant of adverse action: In your final adverse action letter, you must explain your choice and tell the applicant that they have the right to dispute your decision. Provide the necessary information for them to get another copy of their report. If you hire a background check agency like One Source, you also need to say that the choice to take adverse action was made by you, the employer, not the reporting agency. Be sure to keep a copy of the letter, its attachments, and the date you sent it. 
5. Destroy sensitive documents: The FCRA requires employers to dispose of background check results securely. Shred or destroy paper copies of the background check, and be sure any digital copies are completely erased. Reports are kept within the One Source platform for at least two years from the date of order entry. 

One Source is always here to help you through processes like adverse action, and we can answer any further questions you have. Reach out to us today to learn more about our TotalCheck Solutions and how we can help you find the best applicant for your organization.