ADVERSE ACTION

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Adverse Action Notice Requirements Under The ECOA And The FCRA

Once you are finished reviewing a consumer report or no longer need an applicant information, the FCRA requires that you securely dispose of the report, including any information that has been gathered in the process. According to the FTC, burning, pulverizing, or shredding of paper documents are appropriate methods of disposing sensitive documents and information. Electronic information should be completely destroyed, so that it cannot be retrieved or reconstructed. Sapphire Background Check recommends all employers to consult with legal counsel to develop a legally compliant adverse action policy.

After an approximate five-business-day waiting period, you can proceed with adverse action. The employer is legally required to provide an official oral, written, or electronic notice to the applicant or employee. The notice should include the name and address of the consumer reporting company along with a statement that the adverse action is based on information contained in the background report. The employer must also provide a statement that the company supplying the report did not make the decision and cannot give specific reasons for the adverse action. Lastly, the employer needs to include a notice of the applicant or employee right to dispute information in the report. The notice should state that the applicant or employee has the right to obtain another free copy of their background report within 60 days.

After the appropriate information has been conveyed to the applicant, you (the employer) must also give the applicant or employee the opportunity to review the report and determine whether the information presented is correct. While the FCRA does not clearly state how long employers must wait after providing pre-adverse action, the FTC recommends that employers should keep in mind the clear purpose of the provision to allow consumers to discuss reports with employers or otherwise respond before action is taken.The FTC suggests that five business days is a reasonable amount of time.

In many cases, it may be in your best interest to take adverse action against a potential or current employee based on information found within a consumer report or background check. Before you reject a job applicant, reassign or terminate an employee, or deny a promotion, you must provide the employee with a copy of the consumer report responsible for your decision. In addition, you are required to provide a copy of Summary of Your Rights Under the Fair Credit Reporting Act, which should have been provided to you by the third-party company that provided your report.

Along with an explanation of the screening process, employers must obtain written permission from the applicant or employee. Without explicit consent, you are not authorized to obtain any information or report. You must explicitly indicate your intention to conduct additional background checks during an individual employment at your company, if that is the case. As an employer, you must certify that the employee was notified and that you have consent, that you have complied with FCRA requirements, and that you will not misuse information or discriminate based on state or federal equal opportunity laws.

Before running a background check or requesting a consumer report, you must inform employees that the information could be used in decisions related to their employment. In other words, individuals must be aware that negative results from a screening could prevent them from getting hired and working at your company. All notifications must stand alone and not be hidden in an employment application. Employers may give a brief description of the nature of the investigation; however, they cannot use additional text or language to confuse or distract from the written notice. Create and maintain honest communication with your employees from the start, and explain to them the background checking process as clearly as possible. Some states limit access to consumer or credit reports, so employers should review applicable state laws.

NATIONAL LAWS AND RESOURCES

In order to set a standard around hiring policies, the federal government has created the Fair Credit Reporting Act or FCRA to monitor and protect both employers and job seekers. With this law, individuals are protected from unfair workplace discrimination and data breaches of their private, sensitive information. Interested in learning more? Be sure to read the official FCRA full text or summary legal document for more details.
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DisclaimerThe material is for informational purposes only and does not constitute legal advice. SappHire recommends all employers consult with legal counsel to develop a legally compliant adverse action policy.