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What is an Adverse Action Notice?

Posted by Ryan Howard on Fri, Dec 06, 2019

What is an Adverse Action Notice

As a professional background screening company, we receive numerous questions from clients and readers of this blog. As an example, someone asked recently if adverse action notices are necessary if the employer sends a note, in writing, stating that the job seeker's qualifications were "not within guidelines." Our question is this: What guidelines? Are the guidelines discriminatory? Was the candidate aware of these guidelines before applying?

We thought we'd start with a basic answer to the most basic of questions:

What is an Adverse Action Notice?

Adverse Action Defined

In this instance, adverse action is defined as a "negative" action that denies an applicant employment or a promotion. Pre-adverse action includes the activities prior to taking adverse action. 

As Defined in the Fair Credit Reporting Act

In the Fair Credit Reporting Act (FCRA), Section 604, the regulation specifies that adverse action cannot be taken against an applicant until they have been provided a copy of their background screening report (also called a consumer report).

The applicant should be notified via pre-adverse action with a letter detailing potential adverse action and the information that lead to that decision. Employers must provide the applicant with a document called, "A Summary of Your Rights Under the FCRA." This document informs the applicant of their consumer rights and allows them the opportunity to dispute the findings of their background check report.

In Section 615 of the FCRA, details of a second notice, called an Adverse Action Notice, state that after the applicant has been given time to dispute the findings, they must be notified in writing that an adverse action has been taken.

Both the Pre-Adverse and the Adverse Action notices should include the contact information of the background screening company (also called a consumer reporting agency) that furnished the report. This information will be used by the applicant to dispute the report results.

Sample Adverse Action Notices

When to Send Pre-Adverse and Adverse Action Notices

Pre-adverse action notices should be sent within three business days of receiving the background check report results. The applicant will have the appropriate information, including a copy of their report, to know that:

  • Their background check results have lead to potential adverse action
  • The background check provider didn't make the adverse action decision
  • The background check provider may have inaccurate information and it can be disputed
  • The applicant must contact the background check provider to dispute the results

The FCRA does not specify a time period for the applicant to dispute the results. If the applicant does not dispute the screening results, a best practice is to send an adverse action notice within five business days of the pre-adverse action notice. 

What Guidelines Can Employers Use to Deny Employment?

Getting back to the original question of denying employment because the candidate's qualifications were not within guidelines, we still want to know, "what guidelines?

Employers are not allowed to use a blanket deny-all policy for withdrawing employment offers. The EEOC suggests, even with criminal records, that employers individually assess each candidate to determine their eligibility for employment.  We highly recommend a Background Screening Decision Matrix to fully document any guidelines used to deny certain jobs or responsibilities. Again, as stated earlier, applicants must be made aware of any guidelines for employment as to avoid hiring bias and discrimination.

For more information about FCRA compliance, or information regarding our free online applicant portal, contact us or click the link below.

Free: Online Applicant Consent Portal

Topics: Human Resources, FCRA Compliance