Where do I need to be careful? Pre/Post Adverse Action

In past articles, we discussed Permissible Purpose and the Disclosure and Authorization.

This article assumes you have a permissible purpose, have obtained a compliant Disclosure and Authorization, have ordered and received the information, and said to yourself “uh-oh” after looking at it.

If you review the information you have received and decide that it is outside your standards, the Fair Credit Reporting Act (FCRA) mandates (and you have certified to us) that you will do certain things before you reject that applicant (or terminate that worker). Below, we have provided, verbatim, the guidance put out by the FTC and the URL to the document.

But before that, this is a series of articles on where employers get into a mess and things you need to pay attention to. The employers who get into trouble often know of this law, but try to get cute with it. “The information I received didn’t affect my decision—I just didn’t like the way they shook my hand.” Or, “I didn’t reject the person because of the information I received, I did it because it made me discover that the employment application was falsified.” There are others we have heard, and they’re non-starters in a lawsuit.

Aside from the avoidance of legal liability, there are good reasons to go through this process. You are not spending your recruiting dollars for the fun of it—you want workers. And would it surprise you to know that in over tens of thousands of court clerks over 3,500 counties that mistakes happen? Have you ever heard of a wrong credit report or someone having their identity stolen? This process is the fair thing to do for your applicants and workers.

The pre-adverse action process can uncover mistakes and prevent you from dealing with an angry, wronged, applicant or worker who didn’t get or lost their job. After you have notified and hopefully discussed the situation with the applicant or worker, you may then take the adverse action.

What should be the time between pre-adverse action and adverse action if you do not hear back from the applicant or worker? Well, the FCRA doesn’t say. If your policy is to wait any less than 5 business days though, we might suggest you discuss that policy with your counsel. You may need a dose of patience to give the applicant or worker more time to respond.

Before You Take an Adverse Action

Before you reject a job application, reassign or terminate an employee, deny a promotion, or take any other adverse employment action based on information in a consumer report, you must give the applicant or employee:

• a notice that includes a copy of the consumer report you relied on to make your decision; and
• a copy of A Summary of Your Rights Under the Fair Credit Reporting Act, which the company that gave you the report should have given to you.

Giving the person the notice in advance gives the person the opportunity to review the report and tell you if it is correct.

After You Take an Adverse Action

If you take an adverse action based on information in a consumer report, you must give the applicant or employee a notice of that fact – orally, in writing, or electronically.

An adverse action notice tells people about their rights to see information being reported about them and to correct inaccurate information. The notice must include:

• the name, address, and phone number of the consumer reporting company that supplied the report;
• a statement that the company that supplied the report did not make the decision to take the unfavorable action and can’t give specific reasons for it; and
• a notice of the person’s right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get an additional free report from the company if the person asks for it within 60 days.

Here is the link to the FTC guidance page and their Pre/Post Adverse Action guidance for employers.