Pre-adverse and adverse action requirements are some of our most frequently asked questions, in addition to disclosures and authorizations.

While adverse action letters may seem more like a burden – yet another step to take, another item to check off the “to do list” – it is actually an opportunity. When the extra step of sending a pre-adverse or adverse action letter is taken, it can help applicants clear up their records and it could truly be your last opportunity before a lawsuit.

Wait! A Lawsuit?

Unfortunately, yes. Pre-adverse and adverse action requirements are one of the top compliance requirements that trip up employers. In today’s increasingly litigious environment, lawsuits can arise when proper procedures aren’t followed.

According to Quicksius.com, “employers face the prospect of an adverse action complaint when denying employment to an individual on the basis of a background check. As an employer, if you use employment screening to assess an individual’s suitability for employment and the process turns up information that would result in your decision not to hire the candidate; there are specific rules you must follow. Broadly defined, the Fair Credit Reporting Act says any decision that is adverse to the interests of the current or prospective employee is an adverse action. Employers who use outside employment screening services are bound by FCRA regulations concerning pre-adverse and adverse action notices.”

The following is excerpted from the Federal Trade Commission site.

Before You Take an Adverse Action

Before you reject a job application, reassign or terminate an employee, deny a promotion, or take any other adverse employment action based on information in a consumer report, you must give the applicant or employee:

• a notice that includes a copy of the consumer report you relied on to make your decision; and
• a copy of A Summary of Your Rights Under the Fair Credit Reporting Act, which the company that gave you the report should have given to you.

Giving the person the notice in advance gives the person the opportunity to review the report and tell you if it is correct.

After You Take an Adverse Action

If you take an adverse action based on information in a consumer report, you must give the applicant or employee a notice of that fact – orally, in writing, or electronically.

An adverse action notice tells people about their rights to see information being reported about them and to correct inaccurate information. The notice must include:

• the name, address, and phone number of the consumer reporting company that supplied the report;
• a statement that the company that supplied the report did not make the decision to take the unfavorable action and can't give specific reasons for it; and
• a notice of the person's right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 days.

To help facilitate pre-adverse and adverse action notifications, AmericanChecked includes links to send at the end of every report with pre-filled basic information. We at AmericanChecked encourage all of our clients to take a moment to review your procedures on this topic and discuss with your counsel if you have questions.