Published on December 26th, 2022 | by Sunit Nandi

What is a Pre-Adverse Action Letter and How to Manage it?

What is a Pre-Adverse Action Letter?

A pre-adverse action letter or notice is a written document that is provided by an organization or an employer to a candidate. This letter informs the candidate about the questionable information found in the background check report. Since a pre-adverse action letter concerns compliance on the organization’s part and rights on the candidate’s part, there are various aspects associated with it that an employer must know. Now that you what is a pre-adverse action letter, here’s how you can handle the process of adverse action.

What Does Adverse Action Mean

Adverse action is any action taken by an employer on the basis of the findings of a pre-employment background check, which affects the possibility of employment of a candidate adversely. Rejecting a candidate for a certain job role or hiring them for a lesser position instead are some instances of adverse actions.

Why is This Important?

Adverse actions lead to litigation as they have the potential to negatively impact consumers. Therefore, the Fair Credit Reporting Act, which was passed in 1970, has a set of procedures that are supposed to be followed by companies and employers to ensure compliance and minimize the risk of litigation. The FCRA guidelines protect the confidentiality of the consumer’s personal information and ensure they stand a fair chance at employment irrespective of their past criminal record.

Pre-adverse action letter is one such measure that comes under the purview of the FCRA. Pre-adverse action letters are important as they allow the candidate to have a complete awareness of employment action that might be taken while giving them a chance to review the background check report and respond to the information. And it is of great importance for employers as failing to provide the candidate with a pre-adverse action letter can result in non-compliance.

The Process of Handling Adverse Action

Effective pre-adverse action letter management is of great importance to employers as it can result in compliance issues. Therefore, one must be aware of the systematic steps that are to be followed before performing a background check and when handling personal information that you access through the background check report that may impact your hiring decision. Here’s a breakdown of the process of handling adverse action to help you better:

1. Provide Disclosure and Send a Notice for Pre-Adverse Action

As already mentioned, the FCRA procedures begin even before you decide to perform a background check. The first step of the process involves providing the candidate with written disclosure that underlines your intention to perform a background check. In addition to written disclosure, you should also seek written consent from the candidate that they are aware of and grant the employer their permission to go forward with the background check.

After the background check is complete, the employer must review the report to determine if the findings may offer reasons to the employer for declining a job application, not promoting the employee, or their termination. If found, the employee must inform the candidate about the same via pre-adverse action notice.

2. The Waiting Period

Once the pre-adverse action notice is sent to the candidate, they must be given enough time to review the notice, along with a copy of the background check report and a copy of the Summary of Rights provided by the employer. While there is no specified waiting period as per the FCRA, the court accepts 5 days as a reasonable timeframe.

3. Review the Report Results Again

Once the candidate goes through the reports, they are given waiting time to offer any clarification if they find any inaccurate information or want to clarify. As the candidate offers clarification, these results must be reviewed b the employer to judge if the clarification leaves any scope for them to reconsider their adverse action.

4. Provide Notice of Adverse Action

When the employer decides to go forward with an adverse action (not hiring, firing, or not promoting) based on the candidate’s report, they must issue an adverse action notice either in hard copy or electronically to state their decision. The notice should also state the rights of the candidates to dispute the decision. They should also be provided with a background check report copy within 60 days of receiving the notice.

If the employer hires a CRA for the background check, they must also specify that the hiring decision was made by them and not the contractor.

5. Properly Dispose of Sensitive Information

Once the process is complete, the FCRA requires the employer to dispose of the background check results securely, either by shredding or incinerating the documents. All the digital copies must be erased irretrievably.

Common Mistakes to Look Out for

While the process of managing adverse action is fairly systematic, there is still scope for certain mistakes when the employer does not carefully go through the compliance requirements of the FCRA. Some of the common mistakes that generally take place and one must avoid include:

Not going through the background check report carefully
Not checking for inaccuracies in the report, legal documents, the pre-adverse action notice, or the adverse action letter before sending them to the candidate
Failing to send a copy of the background check report and the Summary of Rights to the candidate
Disregarding the rights of the candidate or not being familiar with the Summary of Rights
Not giving the candidate enough time to review the pre-adverse action notice and the background check report

Conclusion

Issuing adverse action notices and having to go through every step of the process with candidates who might not be a good choice for your organization (based on the reports) can be a daunting or rather unpleasant experience. However, it is an extremely crucial process based on the FCRA guidelines to ensure complete compliance with both the FCRA and the local laws. Irrespective of the information you find out about the candidate, it is important that you go about the process in a respectful and professional manner.

Tags: Letter, manage, pre-adverse action

About the Author

Sunit Nandi I'm the leader of Techno FAQ. Also an engineering college student with immense interest in science and technology. Other interests include literature, coin collecting, gardening and photography. Always wish to live life like there's no tomorrow.