Background Checks and Adverse Actions

Background Checks and Adverse Actions

If you’re running background checks on potential hires as part of responsible and safe hiring practices, then you know that compliance is a monumental task. Disclosures and consent forms are critical, as are using and storing the information appropriately. But another piece of the compliance puzzle is adverse actions. Let’s take a closer look at adverse actions to understand what they are and why they matter.

Definitions

FCRA

The Fair Credit Reporting Act (FCRA) is in place to protect consumers from being unfairly denied credit, housing, or employment because of errors in consumer reports. Consumer reports are reports prepared by consumer reporting agencies for the purpose of ascertaining an individual’s creditworthiness, character, or reputation. FCRA regulations governing consumer reports extend to motor vehicle checks, credit reports, reference checks, criminal history checks, and other similar activities. The FCRA outlines civil and statutory penalties for noncompliance. 

Adverse Action

The FCRA governs background checks. When it comes to background screening, adverse action refers to any unfavorable employment decision made as a result of information uncovered in a background report. This often refers to the decision to deny employment, but it could also be terminating a current employee or refusing a promotion. 

Best Practices

While it’s critical to consult your legal team for information on how to stay in compliance with FCRA regulations, the following are considered best practices in the event that you determine an adverse hiring decision is the best course of action:

  • Notify the applicant. The preliminary notification is called a pre-adverse action notice. It needs to include information about the screening agency, a copy of the report or how to obtain a free one, and a description of the individual’s rights. 
  • Allow time for disputes. Applicants must be given ample time to dispute any information in the report and make corrections if necessary. They may also wish to provide evidence of restitution or rehabilitation. 
  • Reinvestigate. Background screening agencies can review corrections supplied by the individual and reinvestigate as necessary.
  • Review the corrected report and reconsider. If the decision is still an adverse one, a final notice of adverse action is sent. 

The Bottom Line

A fair policy consistently applied will keep your organization in compliance with FCRA regulations. Your background screening vendor will also assist with these issues. Look for a partner that prioritizes compliance with automatically generated documents, and that keeps a clear electronic records trail. You and your employees will benefit from hiring practices designed to protect both individuals and your organization.