The Fair Credit Reporting Act (FCRA) passed in 1970, is a federal law that promotes the accuracy, fairness, and privacy of consumer information.
This legislation regulates consumer reporting agencies (CRAs) as well as all employers who conduct criminal background/credit checks on new hires.
However, some organizations fail to realize that both the CRA and the employer have a duty to comply with the FCRA. As a result of any employment screening process, the employer assumes a fair deal of liability that is unshared with the CRA.
Learn more about FCRA compliance here
What does employer compliance entail?
One of the biggest responsibilities is the proper notification of any action (or intent to act) on information uncovered in a background check. In other words, if a hiring decision is to be made based on findings provided by a CRA, the employer must duly inform the candidate.
As many employers are well aware, this is accomplished through pre-adverse and adverse action notices.
Pre-Adverse Action Letter vs Adverse Action Letter
The difference between pre-adverse and adverse action letters or notices is a matter of “may do so” and “will do so.”
Pre-adverse action letters inform a candidate that an employer might take adverse action based on information in their report.
Adverse action letters inform a candidate that a definitive decision has been made to take adverse action (most commonly to not hire a candidate or rescind an offer of employment).
4 Ways Peopletrail Helps Employers Remain in Compliance
Many organizations seek compliance assistance when it comes to their employment screening processes. While we would never recommend that any organization disregard their need to be aware of applicable laws and regulations, there are many CRAs that are experienced in assisting with employer (FCRA) compliance.
Any reputable screening partner should offer the following services:
1. Digital Letter Population, Archiving, and Documentation
At the bare minimum, screening providers should offer an electronic means by which employers can easily populate and send pre-adverse and adverse action notices. This system should also archive all letters sent and document their dispatch date and time.
2. Pre-Adverse Action Notice Customization
The FCRA does not require specific content to be included in the pre-adverse action notice. In fact, the notice doesn’t even have to be a letter.
However, there are some instances where pre-adverse action notices must include certain details relating to the candidate’s report.
For example, California law requires the employer to provide the candidate with a specific pre-adverse notification if they are considering adverse action. This notification must include the following:
- Notification that the employer has made a “preliminary decision that the applicant’s conviction history disqualifies the applicant from employment;”
- Notification of the disqualifying conviction or convictions that are the basis for the preliminary decision to rescind the offer of employment.
- A copy of the conviction history report, if any; and
- An explanation of the applicant’s right to respond to the notice of the employer’s preliminary decision before that decision becomes final and notification of the deadline by which the applicant may respond. This explanation must inform the applicant that the response may include the submission of evidence challenging the accuracy of the conviction history report that is the basis for rescinding the offer, evidence of rehabilitation or mitigating circumstances, or both
- Specification of disqualifying conviction/convictions that are the basis of the preliminary decision to rescind the offer
Laws such as this necessitate that pre-adverse action notices are customizable to some degree.
3. Pre-Adverse Action Management/Automation
Many organizations want a screening partner that can save them time and money by managing or automating pre-adverse action processes that can be influenced by pre-established pass-fail criteria. For example, if a candidate’s report doesn’t meet established criteria, some organizations may want a pre-adverse letter sent out automatically.
Other organizations choose to send out more softly-worded notices to all candidates who undergo a background check stating that report results may or may not lead to adverse action.
It is tremendously helpful when an organization’s screening provider can handle these processes for them.
4. FCRA Expertise/Best Practices
Of course, it is beneficial for organizations to partner with screening companies that are FCRA compliant themselves. Furthermore, screening partners that keep up to date on all applicable laws and follow best practices are better able to help employers manage their compliance effectively.
Straying into compliance gray areas creates unnecessary risk for all parties involved. There are certainly right ways and wrong ways to manage pre-adverse and adverse action notices and the right ways always begin with expertise.
- Both the CRA and the employer have a duty to comply with the FCRA.
- One of the employer’s biggest FCRA compliance responsibilities is to provide proper notification of any action (or intent to act) on information uncovered in a background check (i.e. pre-adverse and adverse action notices).
- Some screening providers such as Peopletrail offer compliance services that include pre-adverse and adverse action notice management.
- Talk with your screening provider to establish processes that ensure compliance on all fronts.
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