What is Adverse Action?
Adverse action is a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee. An adverse action is generally taken by a business or government based on a criminal past or information found in consumer reports. In the event of an adverse action, applicable law describes the various remedies that may be taken.
What is required to take Adverse Action?
Although not required by the FCRA, it is a recommended practice to have the candidate show a form of picture identification to help verify his/her identity. This is especially important in some states such as California, Oklahoma or Minnesota where a candidate can elect to receive a copy of the consumer report during the consent process. The employer/end-user must take the following steps BEFORE ordering a consumer report from First Advantage.
STEP 1. CERTIFY TO FIRST ADVANTAGE: Specifically certify to First Advantage that you, the employer, will: (i) provide a written disclosure and obtain a written authorization from the candidate; (ii) comply with the pre-adverse and adverse action procedures; and (iii) not use the consumer report in violation of any equal opportunity laws or any other laws.
STEP 2. PROVIDE DISCLOSURE TO CANDIDATE: Provide a clear and conspicuous disclosure in writing to the candidate in a document that consists solely of the disclosure, stating that a consumer report may be obtained for employment purposes. This Disclosure must be in a separate document and cannot contain any additional information except for the consumer’s authorization. Please note that the Disclosure cannot be made a part of any other form including the employment application.
Reference a Sample Authorization (self-standing)
STEP 3. OBTAIN AUTHORIZATION FROM CANDIDATE: Obtain written authorization from the candidate. As stated above, the Authorization may be obtained in the same document as the Disclosure, which is an exception to the general rule that the Disclosure must be in a separate document that consists solely of itself. In fact, some FTC opinions have found that having the Authorization on the Disclosure heightens the consumer’s awareness to the Disclosure and furthers its purpose.
Therefore, one of the ways to comply with the Disclosure and Authorization requirements is to include the Authorization on the same document as the Disclosure but keep this combined document separate and apart from the employment application form. Another method of compliance is to use two separate documents, having the Disclosure by itself and the Authorization by itself.
• Reference a Sample Authorization (self-standing) document.
• Reference a Sample Combined Disclosure and Authorization document (identifying information can be obtained on an additional page).
ADVERSE ACTION PROCEDURES
Not only does the denial of employment fall under the FCRA definition of “adverse action”, but also any other decision for employment purposes that adversely impacts any current or prospective employee will constitute an adverse action*.
STEP 4. PROVIDE CANDIDATE PRE-ADVERSE ACTION DOCUMENTS: If the consumer report contains information, in whole or in part, that will negatively impact the employment opportunities of the candidate or employee the employer must provide all of the following BEFORE such an adverse action is made
• A pre-adverse action notice,
• A copy of the consumer report; and
• Summary of Rights under the FCRA. This document is drafted by the Consumer Financial Protection Bureau (CFPB).
This pre-adverse action process allows the candidate the chance to dispute the negative information in the report. The employer should allow a reasonable amount of time for the candidate to respond to this pre-adverse notification before final determination is made or adverse action is taken. (Note: There is an FTC opinion letter that deems 5 days as reasonable, but it will depend upon the particular facts and circumstances and whether the candidate has a reasonable opportunity to dispute any information that may be incorrect.*)
Reference a Sample Pre-adverse Action Letter.
STEP 5. NOTIFY CANDIDATE OF ADVERSE ACTION: If the candidate does not dispute the information after a reasonable period of time or if the information is correct, the employer may then take an adverse action (such as not employing the candidate) by providing the following in writing, orally or electronically* (First Advantage recommends written documentation):
• A notice of adverse action* to the candidate;
• The names, address and telephone number of the consumer reporting agency and a statement that “the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the candidate the specific reasons why the adverse action was taken”; and,
• A notice of the candidate’s right to obtain within sixty (60) days, a free copy of the consumer report from the consumer reporting agency and to dispute the accuracy or completeness of any information in a consumer report.
Reference a Sample Adverse Action Letter.
Some variances exist for non-written consents in the trucking industry.*
Please be aware that some states have requirements in addition to the FCRA that must be complied with as well. For example, in the states of California, Minnesota and Oklahoma, the candidate must be provided a written disclosure with a box that allows the candidate to select the option to receive a copy of the consumer report.*
* First Advantage provides all of this information for users who indicate that they would like to initiate an adverse action. For your protection, we recommend that you consult with legal counsel to develop a fully legally compliant adverse action policy.
A Summary of Your Rights under the Fair Credit Reporting Act aka Summary of Rights
Established by the FTC, this document must be attached to a background report being provided to a candidate/employee.