A recent court case ruling highlights a huge win for Consumer Reporting Agencies (CRAs) and their clients. At the heart of the case was an examination of pre-adverse action and adverse action procedures.
Here’s what the woman stated in her lawsuit:
She claimed an employer violated the Fair Credit Reporting Act (FCRA) by not providing her with a copy of her background check and summary of rights before eliminating her from the candidate pool. She said the employer made the decision to deny her a job before sending her a pre-adverse action letter.
Here’s what the judge said:
The employer did give the woman a pre-adverse action letter and clearly explained that it would be “be completing [a] review of [Plaintiff’s] application … and may take adverse action based on the enclosed report.” That particular letter also included a summary of rights. The woman’s criminal history report turned up something the employer didn’t like. They had telephone and email conversations with the woman, but ultimately decided to send her an adverse action letter telling her they wouldn’t be hiring her. The judge said this complied with FCRA law.
Why is this important? A few reasons.
- It addresses the timing employers might use in their hiring communications, background check consents, and delivery of pre-adverse action and adverse action notices. In this case, the employer gave the woman a pre-adverse action letter BEFORE completing her background check. The letter also included a summary of rights notice that was give BEFORE completing her background check. Once the check was completed, the employer gave the woman time to explain her results, but gave her an adverse action notice AFTER those communications. The court found that all of these procedures fell within the scope of the FCRA. So, employers, even if you deliver a pre-adverse action notice and a summary of rights BEFORE running the background check you are still in the clear.
- It highlights the importance of keeping record of all communications, written or otherwise. Both parties in this case did due diligence in organizing their communications and providing a solid timeline for attorneys to base their case and for the judge to form a ruling. This is an important tactic for employers and employees to always follow in the job search process. If this is not already a part of your company’s hiring policies and procedures, it should be.
- It reminds us of the crucial importance and legal necessity of adverse action. If you don’t know what adverse action is, it is when an employer decides not to hire an applicant based on the information in the background check. But there are some steps that employers must take to comply with FCRA and stay in the Federal Trade Commission’s (FTC) good graces. Before you tell the candidate you’re not hiring them based on information collected in the background check (in itself, called Adverse Action), you must give the applicant:
- A pre-adverse action notice that includes a copy of the background check you used to make your determination.
- A copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.” Your screening agency should supply you with this.
- Once this pre-adverse action notice is completed, the candidate can review the information and explain or ask for a correction of any negative information. If this doesn’t happen within a reasonable amount of time, you can move forward with your Adverse Action notification.
- You must tell the applicant in person, in writing, or electronically that he was rejected because of information in the report.
- Include the name, address and phone number of the screening agency.
- Inform the applicant that the screening agency didn’t make the hiring decision and doesn’t know why you weren’t hired.
- Ensure the applicant knows that she can dispute the information in the report, ask for a correction and request a free report from the same agency within 60 days.
Hey employers! If you’re not quite sure what an authorization form or a summary of rights form should look like, take a look at these templates. We’ve done the hard work you and prepared a generalized statement for you to reference.
Tell us your experiences with Adverse Action. Employers – did you get it right from the start or did you need a little help along the way? Employees and job candidates – did you know what adverse action was when you started the application process?
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