The Broadening of Adverse Action

Adverse Action includes any decision that is unfavorable toward an applicant, employee, consumer, or volunteer that is based all or in part on the results of a background screen. This can include but is not limited to denial of employment, promotion, transfer or raise. It is also when an applicant is denied a rental agreement or special terms to an agreement. The FCRA and several state legislatures require adherence to certain procedures when action is taken.

Broader Adverse Action Definitions

Recent litigation has brought to light other ways to define Adverse Action. We will explore a couple examples here.

In Buon v. Spindler, a school principal sued the school district, because she was subjected to adverse action when she was denied attending paid programs due to her race/color/national origin. The Second Circuit agreed that this circumstance was indeed adverse action.

In Rahman v. Exxon Mobil, an employee claimed his termination was due to inadequate training because of his race. The Fifth Circuit agreed, finding that inadequate training is adverse action.

Traditionally, we think adverse action is related to hiring/firing of employees and candidates. But in these two cases it is clear that litigation paints a broader scope to the definition of adverse action.

The Purpose of Adverse Action Notification

The FCRA outlines the requirements for taking adverse action to accomplish three primary goals:

1. Inform the applicant of their rights under the FCRA
2. Ensure the applicant knows adverse action was taken based all or in part on the results of a background report 
3. Allow the applicant to review the background report and dispute any inaccuracies.

Inherent in the adverse action process is giving the applicant the ability to correct inaccurate or incomplete information that could influence your decision to continue with an offer of employment. This is the most important goal of adverse action, offering protection for the employer and the subject of the background report.

The Adverse Action Process

Adverse Action has three stages:

1. Pre-Adverse Action Letter
2. Waiting
3. Post-Adverse Action Letter

The Pre-Adverse Action Letter informs the applicant that an employer is going to take adverse action. Similarly, the Post-Adverse Action Letter advises the applicant that the final decision not to pursue employment has been made.  

Adverse Action Letter Services 

Choice Screening helps our clients remain compliant when taking Adverse Action by offering Pre-Adverse Action and Post-Adverse Action services that are routinely audited and overseen by our internal Compliance Director. Click here for more information on Adverse Action Letter Services.

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As a consumer reporting agency, we cannot act as your attorney or give you advice. This blog is informative and not all-encompassing. It is not meant to provide legal advice. You must consult qualified legal counsel to ensure you are maintaining a compliant program.