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Your Adverse Action Checklist – Do’s & Dont’s

By April 26, 2021May 21st, 2021Newsletter

Many organizations are not fully aware of what Adverse Action means and that it applies to both employee and volunteer candidates, and the implications that can occur if not followed correctly. It is important to know that when the Adverse Action process is not properly executed per the Fair Credit Reporting Act (FCRA) federal guidelines, it can result in penalties and even a potential lawsuit.

What is Adverse Action?

When using consumer reports to make a hiring or other employment decision, Adverse Action is a 3-step process that organizations are required to follow under the FCRA when an applicant is denied employment or a volunteer is denied a position based on findings in their background check report (The Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) enforce the FCRA). The 3-step process consists of:

  1. Pre-adverse notice sent prior to making a final decision
  2. Waiting period
  3. Adverse action notice sent once a final decision is made

Adverse Action starts prior to making a final onboarding decision and is a way to protect employee applicants and volunteers. This protection is important due to federal and state court record keeping systems not being 100% accurate. Adverse Action notifications are sent to alert the candidate if it has been determined they are not eligible for hire or to volunteer for a specific position based on what was found in their background check. The candidate also receives a copy of their background check report so they are able to address inaccuracies and have the opportunity to question the information in the report.

Below are 10 recommended Adverse Action DO’s to help your organization mitigate risk:

  • Make sure your Adverse Action policy includes steps for Pre-Adverse and Adverse Action notifications, and a waiting period in between.
  • If you plan to take Adverse Action based on something found in a candidate’s background check, it is recommended to send the Pre-Adverse notification in writing.
  • Restrict communication with the volunteer/employment candidate until after the Adverse Action process has run its course.
  • Include a copy of the background report, the FCRA required “Summary of Rights” and state notices with your Pre-Adverse Action notice.
  • Provide required City/State notices on a separate page(s) from the other information in the Pre-Adverse notice.
  • Include the Consumer Reporting Agency contact information in case the candidate has questions or wants to dispute the information.
  • Give the candidate adequate time to respond and dispute (at least 5 days) between notices, sometimes longer to provide candidate a reasonable period of time to respond.
  • Take into consideration Ban the Box laws that require a reason for an adverse decision and special forms.
  • Identify and explain how to contact the organization, or additional parties who might have access to the report, in the Adverse Action notice.
  • Explain that the background screening company does not make the onboarding decision in the Adverse notice.

…and here are a few things of what NOT to do:

  • Do not make a final decision on the candidate before the Pre-Adverse notice goes out.
  • Do not rely on verbal, undocumented Adverse Action.
  • Do not confuse Adverse Action notification with individualized assessment notices:
    • Pre-Adverse and Adverse notices are required by the FCRA for purposes of accuracy
    • An individualized assessment is recommended by the EEOC (Equal Employment Opportunity Commission) to prevent discriminatory practices. It allows an employee or volunteer candidate to explain why a criminal record shouldn’t disqualify them for the position they seek.

If interested in learning more about the Managed Adverse Action service that Sterling Volunteers provides and obtaining adverse action notification templates, contact Sterling Volunteers.

Disclaimer: Sterling Volunteers is not a law firm and does not dispense legal advice. The information provided within this article is general business information to help build awareness of the Adverse Action steps that should be taken. This is not legal advice, nor should it to be relied upon as such, even if you are currently a client of Sterling/Sterling Volunteers. You are encouraged to seek advice from your own legal counsel within your state of operation, concerning matters covered in this article.

501(c) Services and Sterling Volunteers have partnered to help create safer environments via secure, quality and compliant background checks. Through this partnership, we can help your organization onboard trustworthy staff and volunteers, while reducing screening costs and providing peace of mind – enabling you to make a greater and positive impact within your community. Contact Sterling for more information.

Sterling Volunteers, the dedicated nonprofit and service sector unit of Sterling, a global leader in background and identity services and accredited member of the Professional Background Screening Association (PBSA), is committed to global safety and helping organizations establish quality, compliant background screening programs for both employees and volunteers.

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