How to Communicate Employment Adverse Actions

Communicating an employment adverse action to an applicant is challenging for all involved. Following proper compliance procedures ensures that applicants are treated professionally and respectfully. Maintaining compliance with the Fair Credit Reporting Act (FCRA) guidelines when dealing with adverse actions can save a business from a lot of problems.

What is Employment Adverse Action?

When a business chooses to discontinue hiring or promoting an applicant based on results from a background search report, it is referred to as an adverse action.

The Employment Adverse Action Process

Prior to beginning a background search, employers must provide applicants with proper disclosure and obtain their written consent. If after completing an authorized background search an employer determines adverse action is necessary, there are three key steps to follow: a Pre-Adverse Action Notice, a Waiting Period and an Adverse Action Notice.

1. Pre-Adverse Action Notice

The first step is for employers to notify applicants that information provided in the background search has resulted in an adverse action. Along with the notice, employers must include a copy of the background search report, a copy of the FCRA document called “A Summary of Your Rights Under the FCRA,” and any other state-required materials. This information provides applicants with an opportunity to dispute any reported information before employers make a final, adverse action decision.

2. Waiting Period

FCRA regulations in most states require that a business allow for a seven-calendar day waiting period so that applicants have a reasonable amount of time to dispute any information.

3. Adverse Action Notice

If employers still decide to take adverse action after the prescribed waiting period they must provide applicants with the following information:

  • A notice of adverse action that is based on the reported information.
  • The reporting agency’s contact information along with a statement that “the reporting agency did not make the decision to take the adverse action and is unable to provide the specific reasons why the adverse action was taken.”
  • A notice to the applicant of his/her right to obtain a free copy of the report from the reporting agency within 60 days. The applicant has the right to dispute the accuracy of the information with the reporting agency.

Adverse Action protocol is extremely important for maintaining compliance with FCRA regulations. Many class-action lawsuits result from not following the process correctly. Additionally, non-compliance with FCRA regulations can result in fines of up to $1,000 per violation.