Understanding the Adverse Action Notice in the Hiring Process

Adverse Action notices are crucial to both employers and applicants during the hiring process. Employers must comply with the Fair Credit Reporting Act (FCRA), which exists to safeguard job seekers from being unfairly denied employment due to false or outdated information in their consumer reports or background checks. 

Read on to gain an understanding of the Adverse Action notice in the hiring process.

What is an Adverse Action Notice?

An Adverse Action Notice is a notification provided to a job applicant when an employer is considering taking adverse action (i.e., not hiring, not promoting, etc.) based on the information obtained during the hiring or screening process. It informs the applicant of a possible pending decision due to specific reasons discovered during background checks, reference checks, or other screening procedures.

The notice typically includes information about the adverse action being considered, such as the specific reason for the potential rejection and the source of the information. 

Why is an Adverse Action Notice required?

An Adverse Action Notice is required by law to protect the rights of job applicants and promote fair hiring practices. Regulated by the Fair Credit Reporting Act (FCRA), the procedures require employers to follow a specific course of action to validate the information found when using consumer reports or background checks to make employment decisions.

The Adverse Action Notice provides transparency in the hiring process, giving applicants the chance to address any inaccuracies or provide additional context about the information being considered. This helps prevent discriminatory hiring practices and allows applicants to present their side of the story prior to the adverse action.

When is a Pre-Adverse Action Notice issued?

An Adverse Action Notice is typically issued after an employer has conducted background checks or other screenings and has obtained information that may negatively impact the hiring decision. The notice is usually sent to the applicant before a final decision is made and, therefore, referred to as a pre-adverse action notice. The notice informs the applicant about the information obtained and that the employer is considering whether adverse action is warranted based on that information.

Employers must carefully review the accuracy and relevance of the information obtained to comply with the FCRA and avoid potential legal consequences. They must also give applicants the opportunity to address any concerns or provide additional information that may impact the final hiring decision.

Is an Adverse Action Notice required after Pre-Adverse Action?

If a candidate issues a prompt and thorough response to the Pre-Adverse Action notice, there is still a chance they could be hired.

If the candidate does not contest the accuracy of their data or if a reasonable amount of time elapses after the Pre-Adverse Action notice has been sent, the employer can then proceed with their adverse action decision. Upon the rejection of employment or the withdrawal of the employment offer, the candidate should be properly notified with an Adverse Action Notice.

The Adverse Action Notice must provide a clear explanation for the adverse action as well as: 

• the contact information for the reporting agency that provided the consumer report
• a notice of their right to obtain a second report, free of charge, from that same consumer reporting agency within a time period not to exceed 60 days
• a notice that informs them of their rights under the FCRA, including the right to dispute the information contained in the consumer report

A Brief Understanding of Adverse Action

Adverse action refers to the unfavorable decisions made by employers based on the information discovered in consumer reports or background checks. Pre-adverse action, on the other hand, occurs before the adverse action is taken, serving as a notification to the individual that adverse action is being contemplated by the employer. This crucial step ensures transparency in the decision-making process and allows the individual to have a voice in the final outcome.