Taking Adverse Action Requires an Eye on the Clock

In following the Fair Credit Reporting Act for Adverse Action Employment, Timing Matters A few years back, when the economy was booming, the challenge for employers in general and HR recruiters specifically was to hire all the workers they needed to fulfill the high demand for their products and services. Today the challenge is exactly the opposite. Employers are faced with the challenge of knowing how NOT to hire all of these people – many of whom are desperate for work. When a single open position yields dozens, hundreds, or even thousands of applicants the challenge of the HR team is how to sift through the applications to find the best employee for the job. In the end, extending an offer to one candidate may mean declining many others, often equally-qualified.

In times like these, Proforma cannot overemphasize to our clients the importance of Implementing and maintaining sound employment screening policies to protect against the potential risk of negligent hiring on one side of the equation, and the prospect of an adverse action complaint from the other. A sound policy addresses, among other things, requirements of the Fair Credit Reporting Act for employment-related adverse action.

According to the broad definitions of the Fair Credit Reporting Act, a denial of employment would constitute an adverse action. Any decision that is adverse to the interests of the current or prospective employee would similarly fit within this definition. When employers use background screening companies (consumer reporting agencies) for employee background checks (including credit reports, employment verifications, criminal records screening, driving records, and more) to hire new employees and evaluate existing employees for promotion, reassignment, and retention, they are bound by FCRA regulations.

One of the keys to maintaining compliance with the FCRA as it relates to adverse action is the timing of required notifications.

3 Key Adverse Action Timeframes to Watch: There are three important time-related concerns for employers when it comes to adverse action notifications:

1. When to Send Pre-Adverse Action Notification: Here’s a situation: An applicant’s background check report shows past undesirable behavior that, if unresolved, would cause you to deny employment to this individual.

What’s your responsibility? As an employer, your responsibility is to send the applicant a “pre-adverse action notification”. This notification must be sent to the applicant before adverse action is taken AND you must provide the individual with a pre-adverse action disclosure that includes a copy of the individual’s background report and a copy of the FTC document, “A Summary of Your Rights Under the Fair Credit Reporting Act.” The goal of this process is to give the individual a chance to respond to the findings or explain any inaccuracies. You are saying that based upon the information contained in the report you are contemplating a decision that will be adverse to the interest of your applicant and if they want to dispute the accuracy or completeness of thin information they must do so.

2. How Long to Wait for a Response After Pre-Adverse Action: A common question among employers is how long to wait between pre-adverse and adverse action notices. The Fair Credit Reporting Act is actually silent on the length of time that should pass between the two notifications. However, since the goal of a pre-adverse action notice is to give the individual time to respond or correct the adverse information, you should give a “reasonable” length of time.

Through an opinion letter, the FTC did give some direction to employers as to what may be considered reasonable. Employers should consider the nature of the job, how the employer does business, and other factors such as building in more time for holidays and weekends.

3. When to Send Adverse Action Notification: Adverse action notifications are to be sent to an applicant or employee after you’ve taken the adverse action. Employers must provide the individual verbal, oral, or written notice that the action has been taken. This notice is given in the form of an adverse action notice, which must include the following:

• The name, address, and phone number of the CRA that supplied the report.
• A statement that the agency that supplied the report did not make the decision to take the adverse action and cannot give specific reasons for it.
• A notice of the individual’s right to dispute the accuracy or completeness of any information the agency furnished.
• A notice of the individual’s right to an additional free consumer report from the agency upon request within 60 days.

Adverse Action Notifications are just one of the many requirements imposed upon employers who use background checks for employment purposes. Today’s economy places greater emphasis upon employers to tighten up their employment screening policies and ensure they do not violate the negligent hiring doctrine and FCRA requirements.