adverse-actionCompliance. It’s something we deal with in all areas of business, including when we choose not to hire, promote, retain, or reassign an individual as a result of something we’ve uncovered in a background check. In the world of employment screening, a background check is considered a consumer report and is therefore subject to the Fair Credit Reporting Act (among others).

The Act, which falls under FTC jurisdiction, specifies certain steps that an employer must take before taking so called, ‘adverse action.’

Your role as an employer in the “compliance dance” is vital when taking adverse action against an applicant or employee, and one that cannot be underestimated given the litigious nature of today’s workforce.

The Dance Begins:  Disclosure and Authorization

An applicant or employee must first acknowledge their awareness that the employer or prospective employer will be running a background check.  The Federal Trade Commission requires that employers provide a standalone disclosure notification document stating their intention to run a background check.

The applicant or employee must then give written consent to the check, which can be completed in a variety of ways.  The best, of course would be a “wet” signature, but in keeping with today’s technology secure electronic authorization is also acceptable.

When an employer receives the results of the background check they naturally have some decisions to make. But the buck doesn’t stop with simply rejecting the applicant.  Adverse action–any activity on your part that would be detrimental to the prospective or current employee–requires a few important steps which can be broken down into the “Adverse Action Two-Step”.

Step One:  Pre-Adverse Action Notification

The FCRA asserts that consumers are entitled to know what is in their file, and how that information could negatively affect their job opportunities.  “Could” is the key word here, because at this point there are still a few more actions you must take before you can proceed with any formal activity or decisions.

As an employer you are obligated, prior to taking any adverse action, to give the candidate two documents:

At this point the next move belongs to the applicant or employee, who has the right to correct, explain, or refute any information in the report.

The FCRA does not give a specific time frame within which the consumer must respond to an employer, nor are you required to hold a job while an applicant files a dispute.  The instruction is to extend a “reasonable” amount of time for the applicant to respond.  The Federal Trade Commission asks that employers take into account the type of job and business in setting up a time frame, and allowing extra response time for weekends and holidays.

Step Two:  Post Adverse Action Notification

When the result of a background report necessitates adverse action, you must inform the applicant or employee of your decision through an adverse action notice.  This can be done verbally or in writing (in a hard document or electronically).

This adverse action notice is only complete when the employer also provides the following:

  • The name, address and phone number of the CRA providing the report
  • A statement that the providing CRA did not make the adverse action decision and cannot give specific reasons for the adverse action
  • A notice of the consumer’s right to dispute the accuracy or completeness of the report
  • A notice of the consumer’s right to additional free consumer reports from the CRA within 60 days

The FTC also requires that once the adverse action is complete that employers properly dispose of the consumer report.  This is done to protect the consumer from unauthorized access to the report and can be done by shredding, burning, pulverizing or destroying the document so that is cannot be reconstructed or read.

Is your background screening company helping you to follow compliance guidelines?  The time to find out is now before you end up with two left feet in the adverse action two-step.