Sterling helps you Understand the “Pre-” in “Pre-Adverse Action”

When a consumer report is being considered for use in an employment related adverse action, the Fair Credit Reporting Act (FCRA) requires that the user of the report, prior to taking any adverse action, must provide the individual a copy of the report and a description of their rights under the FCRA. This notification prior to a final employment determination is known as a “Pre-Adverse Action”.

Recently, there has been litigation against several large employers for providing notice verbally to applicants about issues with their background check before the delivery of a formal pre-adverse notice, a copy of the report and a copy of the rights under the FCRA. The FCRA does not require that the pre-adverse be a formal document (though it is recommended as a best practice), but it does require the delivery of a copy of the report and a copy of the individual’s rights under the FCRA prior to any adverse action.

As a best practice, employers should avoid any communication with an applicant or employee about derogatory background check information until after such time as the FCRA pre-adverse action process requirements are satisfied. An innocent communication via telephone, or e-mail, advising the individual that “there is a problem with your background check and we cannot move forward with your application” could be grounds for a technical violation of the FCRA.

Any violation of the FCRA that is deemed “willful” (in reckless disregard), can subject a company to statutory damages of between $100 – $1,000 per individuals, along with punitive damages and attorney fees. Failure to comply with the FCRA’s adverse action requirements has resulted in several multi-million dollar legal settlements.

Be sure to advise all of your employees involved in the background screening process that they should avoid any communication with an applicant regarding derogatory background check information until after the delivery of required pre-adverse action notice requirements.