May 3rd, 2018 | Debbie Lamb, Sterling Talent Solutions
How Technology Can Help You Simplify the Adverse Action Process
A background check on your perfect candidate reveals a criminal record. Now what? Adverse Action is an important process which employers are required to follow under the Fair Credit Reporting Act (FCRA) when employment is denied based on what is revealed in a background check. Sterling presented the first part of an HR Compliance webinar series called “HR Compliance Part 1: Adverse Action”. Sterling’s own Angela Preston, Joe Rotondo and Patty Hanley explained a company’s legal requirements, timing and process for sending adverse action letters, the implications for not getting the procedures right and how technology can help companies simplify the adverse action process.
Legal Requirements of the Adverse Action Process
When using consumer reports to make employment decisions, including hiring, retention, promotion or reassignment, a company must comply with procedures listed as part of the FCRA. The variety of laws/rules can be overwhelming to an employer, and if regulations are not complied with properly, an organization might have to deal with penalties. Adverse action regulations apply to new hire candidates who have been offered a position with a company on a conditional basis or current employees.
The decision to start adverse action can be in whole or in part on the findings of the consumer report, but it must come from the employer. The employer must state the decision for adverse action was not made by the Consumer Reporting Agency (CRA) or third-party background check provider. The candidate has a right to dispute the information in their report with the CRA and to ask for a free copy of the report within 60 days from the consumer reporting agency. If an applicant disputes the findings of the employment background screening report, then the adverse action process needs to be stopped.
The Two -Step Adverse Action Process
Companies must follow an FCRA mandated two-step process before they take any adverse action based on the findings in a consumer report. The two steps consist of a pre-adverse notice, sent prior to making a final decision followed by a notification of adverse action, sent if a decision is made not to hire. To start the process, a Pre-Adverse Action Notice/Letter is sent to the candidate along with the copy of the background screening report, federal summary of rights and any appropriate state summary of rights. In the last step, an Adverse Action letter is sent to the candidate with another copy of the federal summary of rights and any appropriate state summary of rights. If the specific adverse action steps are not followed, it could lead to litigation.
Pre-adverse action provides applicants with an opportunity to review their report for accuracy and completeness. It is sent when there is adverse information on a background check that could influence the decision and must be sent prior to making a final decision. An individual has at least five days to contest the results. FCRA mandates that the candidate’s dispute must be resolved by the CRA within 30 days. A 15-day extension is permitted if a consumer provides additional information during the process. If the individual does not contest the accuracy of the report within five days or does contest the information but the re-investigation confirms the original findings, the client may take adverse action. Adverse Action is an action that denies an individual employment or promotion, etc. When giving adverse action, an employer must give written notification to the applicant stating what action is being taken.
Some states and cities have even more stringent processes and require more information from the employer when a hiring decision is made based on the findings of a background screening report. Some states such as New Jersey, New York, Washington and Massachusetts require specific state summary of rights in addition to the Federal Summary of Rights. In New York City, if there is adverse action based on criminal history, employers must complete and provide a copy to the applicant of the New York City Fair Chance Act Notice. In Los Angeles, employers must provide a written assessment required by the Los Angeles Fair Chance Initiative for Hiring Ordinance to the applicant.
How Technology Can Help You Simplify the Adverse Action Process
Technology can be a valuable tool for any employer looking to streamline the process if it supports all the components of Adverse Action (including jurisdiction-specific rules), reduces administrative work and provides complete transparency into the process by including an audit log. Technology, if built correctly, can easily adapt to regulatory changes bringing in the most valuable benefit of supporting workforce compliance.
When considering a technology-based Adverse Action solution, it is important to understand how their solution helps you. A good technology-based solution will help an employer facilitate the assessment process by providing a channel to request additional information from the candidate before making a final hiring decision.
Look for a solution that:
- Supports completion of the individualized assessment and/or Fair Chance form, in addition to the Adverse Action process.
- Identifies when the assessment form is required and does not allow you to initiate the Adverse Action process until it is complete.
- Provides an electronic experience for the completion of the assessment form.
- Securely stores completed assessment for you and provides a way for you to easily access or download them when you are making your hiring decision.
- Understands jurisdictional requirements at the time you initiate the Adverse Action process, including having the flexibility to adapt to compliance and regulatory changes as they take effect.
- Considers locations of employment to determine the number of days that should elapse between the Pre-Adverse Action letter and the Final Notice of Adverse Action
- Knows what the appropriate Summary of Rights forms that a candidate should receive
- Identifies whether an employer is required to provide a ‘reason’ for potential disqualification and include that reason in the Pre-Adverse Action letter.
Sterling strives to keep its clients up to date on laws pertaining to the background screening industry. To find out more about the importance of following the adverse action procedure and information for the background screening industry, listen to an On Demand version of the “HR Compliance Part 1: Adverse Action” webinar. Don’t miss the second part in our HR Compliance series, “GDPR Compliance: What It Means for HR in the US” on May 22nd.
This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.