Tim Thoelecke Jr.
January 31, 2023

Adverse Action Process

After receiving the results of a background check and noticing something that is a concern, you might consider rejecting an application.

What happens and what to do if a background check uncovers something that is a concern

Background checks are used by employers to confirm a candidate’s employment history, experience, and education as well as look for any indication of prior criminal behavior. Any employer that conducts background checks will likely encounter applicants with some history that merits further exploration. 

When you examine someone’s information, you may discover employment or education history discrepancies, that they have a criminal background, or a less-than-perfect driving record. After receiving the results of a background check and noticing something that is a concern, you might consider rejecting an application or terminate an existing employee. However, you should know that there is a process to follow if you want to be in compliance with state and federal laws. 

Background screening is regulated by the FCRA – Fair Credit Reporting Act – and there is a sequence of notifications required which allow the potential employee to explain anything that is reported on a background check. This is known as the Adverse Action process.

Laws and Regulations Relevant for Background Screening

The Fair Credit Reporting Act (FCRA), Equal Employment Opportunity Commission (EEOC) guidelines, and, where relevant, state and municipal regulations must all be followed by all companies who want to use background checks.

The FCRA mandates that employers obtain written consent from applicants before doing a background check. If the report exposes details that might adversely affect the hiring decision, employers must abide by the adverse action standards outlined in the FCRA.

The international campaign known as “Ban the Box” started in 1998 by civil rights organizations that demand that companies remove inquiries about an applicant’s criminal background from job applications in order to stop employment discrimination. Several states have laws that aim to eliminate barriers that make it difficult for persons with criminal records to get work. States have different compliance requirements, so it’s critical to be aware of those that apply to your business based on where your locations are as well as where your staff live.

What Is Adverse Action?

So, what happens if you discover that a certain candidate is not a good fit for the position you are hiring due to something that showed up in the background screening? In certain circumstances, you can decide to withdraw a job offer. However, this shouldn’t happen without giving the applicant prior warning. This is when the Adverse Action process begins.

Adverse action refers to the process of alerting the candidate and determining if a negative background report is accurate and will prevent an employer from employing a candidate.

Any unfavorable action an employer takes which has a negative impact on someone’s work status and is motivated by the details you learned from a background check report is considered an Adverse  Action. This occurs each time an employer chooses to act in a way that would deny a candidate the implied equal employment opportunity they are entitled to when seeking for a job. The broad definition of Adverse Action might include everything from outright rejecting a new application to blocking an existing employee’s request for a transfer or promotion. This can also entail demoting someone by giving an existing worker a less important role.

Employers are required to carefully follow defined protocols when issuing an Adverse Action notification under the FCRA, or Fair Credit Reporting Act, as well as under some local and federal authorities. If you find yourself refusing to hire or promote someone based on information found in their background check, be sure you adhere to all of the established Adverse Action procedure requirements.

The Adverse Action Process

  1. 613a Letter

    If anything negative shows up on the report, a 613a letter is automatically sent to the applicant. A 613 Letter is  a notification that negative information was found in a criminal database background check that may influence an applicant’s eligibility for employment. Sending out a 613a letter offers the applicant the opportunity to explain or dispute the criminal database information discovered. The 613 letter is not considered to be an Adverse Action Letter as it merely serves to give advance notice to the applicant that information was discovered that merits further investigation.

  2. Pre-Adverse Action Letter

    A Pre-Adverse Action Letter must be provided to an applicant if a background check conducted before hiring determines that the applicant is not a good fit for the position. Pre-Adverse Action Letters can be sent electronically or in paper copy. The Screeningwise portal has this function built in.

    Its objective is to let the candidate know that, due to information found during the background check, you will not be hiring them for the position. You must give the applicant a copy of the background investigation report and the “Summary of Rights under the FCRA” form in addition to this letter.

    A candidate has the right to confirm that the information on the background check is valid and to challenge any erroneous information after receiving the Pre-Adverse Action notification.

    Here is an example of a pre-adverse action letter.

  3. Waiting Period

    Before sending your application a formal adverse action letter, you must wait “a reasonable period of time,” according to the FCRA. Before sending your applicant an official Adverse Action letter. We suggest you to hold off for at least five working days. This makes sure the applicant has adequate opportunity to contest any inconsistencies discovered in the report.

    The candidate may want to contest certain sections of their background report; therefore, the employer must give them a fair amount of time to evaluate the papers they received as part of the adverse action procedure. Any details in the background check report that the candidate feels are incorrect must be open to discussion.

    The employer must also provide the applicant an opportunity to explain the report’s conclusions or, if necessary, update the record by offering additional information. Although the FCRA does not prescribe a precise waiting period, traditionally, courts have determined that five to seven days is an acceptable amount of time to provide this procedure.

  4. Adverse Action Notice

    If you still decide not to hire the candidate based on the results of a background check after the candidate has responded to the Pre-Adverse Action Letter and asked for the necessary changes to be made to their background check document, you must issue an official Adverse Action notice outlining your full reasoning. This notification may be distributed electronically or in paper copy.

    Here is an example of an adverse action notice and what it should include.

    The Screeningwise portal has this notice built in.

Are You Compliant With the Law?

Using background checks when hiring new employees can increase productivity and foster a healthy work environment for all your staff. However, you need to make sure you are compliant with the laws when using background screening. Screeningwise aims to help employers have a hassle-free employee screening process that is in line with all the laws and regulations.

Tim Thoelecke Jr.