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Creating a Compliant Background Screening Program Part 2: Adverse Action Process By Robert M. Graham, Esq.
This article is the second in a series of articles to address some important concepts that you must understand to have a compliant background screening program. In Part 1, we explained steps necessary to bring your disclosure and authorization forms into compliance. In this article we will address another area where class action litigation is increasing. As mentioned before, Congress expanded employer responsibilities because of the concern that inaccurate or incomplete consumer reports could cause applicants to be denied jobs unjustly.* Another of those expanded responsibilities includes following a very specific process whenever the information you receive in a background check might cause you to take some adverse action against the applicant. The language in §604(b)(3) of the FCRA requires the following of any background check run for employment purposes: before taking any adverse action based in whole or in part on the report, the person intending to take such adverse action shall provide to the consumer to whom the report relates – (i) a copy of the report; and (ii) a description in writing of the rights of the consumer under this title
PRE-ADVERSE ACTION So let’s break this down: Before taking any adverse action – This means you have to perform this step BEFORE you make a final decision. There must be a meaningful opportunity to change the course of action at this point. Adverse action – An adverse action can be any negative consequence. It is not limited to deciding not to hire. An adverse action could be not promoting or transferring to a less desirable position. Anything that would be deemed negative from the consumer’s point of view and is as a result of information contained in the background check. 7131 Riverside Parkway Tulsa, Oklahoma 74136 o: 918.933.5555 f: 918.933.5550 trak-1.com
Based in whole or in part – If you looked at a background check that has negative information about an applicant it is presumed that you based any negative action on that information. This is where some employers try to get clever and say, “I didn’t base my decision on the fact that the applicant had a felony. I just didn’t think he was qualified – and I found a more qualified applicant.” This will not work. You should
treat any negative information on the report as an absolute trigger for the adverse action process. Items to provide to the consumer (applicant) – You must provide a complete copy of the background check report to your applicants. Give them the same thing that your screening provider gives to you. You must also provide a copy of the document titled, “A Summary of Your Rights Under the Fair Credit Reporting Act.” Your screening company should provide this when they set up your account. You can find this document here. All of the preceding information summarizes what is commonly referred to as the “pre-adverse action notice.” This is the first part of a two-part notification process. The second part, logically, is referred to as the “post-adverse action notice.” But let’s pause for a moment to discuss an important step that must occur between the two separate notifications. Remembering that one of the goals of the FCRA is to guarantee that the information supplied by consumer reporting agencies is as accurate as possible, consider for a moment what you as an applicant would want if a background check contained inaccurate information about you. You would probably want an opportunity to correct the information, right? Before proceeding from the pre to the post-adverse action notice you must provide the applicant with a meaningful opportunity to respond and correct any inaccurate information. The FCRA does not define how long you must wait for the applicant to respond, but opinion letters published by the FTC have come to set a reasonable timeframe to be five business days. Managers who do a lot of fast-paced hiring usually cringe at this. Looking for confirmation they present this scenario: An employer has an open position for which they need a new employee immediately. Two applicants are presented both of whom are qualified. One has a background check with negative information, the other has a clear report. Does the employer have to wait five days to make a decision to allow the applicant with the negative report to dispute the information? The short answer is YES. The five day period is not fixed. Once you contact the applicant and they confirm the accuracy of the information you are free to move forward. In some cases, however, you may have to pause your process to comply with the adverse action requirements. POST-ADVERSE ACTION 7131 Riverside Parkway Tulsa, Oklahoma 74136 o: 918.933.5555 f: 918.933.5550 trak-1.com
Once you have provided the applicant with a meaningful opportunity to correct inaccurate information and you intend on moving forward with your adverse action against them the post-adverse action notice obligation kicks in. That obligation is found in §615(a) of the FCRA and requires the employer to provide oral, written, or electronic notice that includes:
the name, address, and telephone number of the consumer reporting agency (including a toll-free telephone number established by the agency if the agency compiles and maintains files on consumers on a nationwide basis) that furnished the report to the person; and a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken; and notice of the consumer’s right (A) to obtain…a free copy of a consumer report on the consumer from the consumer reporting agency…, which notice shall include an indication of the 60-day period under that section for obtaining such a copy; and (B) to dispute…with a consumer reporting agency the accuracy or completeness of any information in a consumer report furnished by the agency.
So let’s break this down: Oral, written, or electronic notice – Here the statue allows for oral or electronic notice in addition to notice that goes out in written form. If you choose to notify orally or electronically consider how you will provide proof of notification. Notice must include –
name, address, and (toll-free) telephone number of the consumer reporting agency indication that consumer reporting agency didn’t make the decision and doesn’t know why consumer has a right to a free copy of the report within 60 days and a right to dispute
Many background screening providers offer adverse-action notice services where they handle the process of sending out the notices on your behalf. Keep in mind that the obligation remains that of the employer under the law. So ask your screening provider detailed questions about how the service works. You and the screening provider will have to coordinate efforts so that they know when you intend to take adverse action.
7131 Riverside Parkway Tulsa, Oklahoma 74136 o: 918.933.5555 f: 918.933.5550 trak-1.com
Under the FCRA there is statutory liability for failing to follow the adverse action process. Each violation can cost between $100 and $1000. As a result, many plaintiff attorneys are using the FCRA to file class action lawsuits against employers. Review your procedures to make sure that before you take adverse action against your applicants you are providing them with the opportunity to correct any inaccurate information contained in background checks. Skipping over applicants with a negative
background check and simply hiring another applicant with a clean record is certainly less burdensome administratively but it comes with great risk.
* Note: According to the Federal Trade Commission, one of the organizations responsible for enforcing the FCRA Background screening conducted on volunteers is subject to the same rules as employment screening. This will be covered in greater detail in another article in this series.
7131 Riverside Parkway Tulsa, Oklahoma 74136 o: 918.933.5555 f: 918.933.5550 trak-1.com
Robert “Matt” Graham is VP of Operations for TRAK-1 Technology, a premier and nationally accredited background screening company that helps companies attract quality candidates, reduce bad hires, enhance workplace safety and secure quality talent. Mr. Graham currently co-chairs the Information Securities sub-committee of the Best Practices Committee for the National Association of Professional Background Screening Association, and is Advanced FCRA-certified. TRAK-1 delivers customized background screening solutions via their proprietary platforms to over 10,000 US companies since 1996. To learn more about TRAK-1, visit www.trak-1.com/nfib , or toll-free 800-600-8999.
