What Every Business Needs to Know about Adverse Action


What Every Business Needs to Know about Adverse Action

To hire? Or not to hire? That’s the big question HR managers face every day.

Hiring is an expensive and risky business. But not hiring? That carries its own share of risk.

Even major companies aren’t immune to its complications. Amazon was hit with three different lawsuits one year because they missed the mark on the FCRA-approved process for not hiring. Earlier this year, Starbucks was forced to settle two class-action lawsuits over its own adverse action fumble.

Covering the basics
It’s important to know the basics. Adverse action includes any action denying a person employment or a benefit based on information obtained from a consumer report bearing on a prospective employee’s or employee’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used in whole or in part for the purpose of serving as a factor in establishing the person’s eligibility for employment purposes. It includes information related to a prospective employee or employee’s credit history, criminal history, employment history, education, etc.

The process applies at the initial hiring and also covers a denial for the purpose of retention, promotion, assignment, or reassignment during the term of the employee’s employment with the employer.

Consider the person
Adverse action done right follows a FCRA-compliant process to the letter. But the process should also focus on the person behind the information.

The EEOC wants prospective employers and employers to consider these factors: (i) the nature and gravity of the offense or conduct, (ii) the time that has passed since the offense or conduct took place and/or completion of the sentence, and (iii) the nature of the job sought or held. The guidance suggests employers develop a narrowly-written policy and procedure for screening candidates and employees for criminal conduct. Additional prospective employers and employers should:

  • Identify essential job requirements and the actual circumstances under which the jobs are performed
  • Determine the specific offenses that may demonstrate unfitness for performing such jobs
  • Determine the duration of exclusions for criminal conduct based on all available evidence
  • Record the justification for the policy and procedures
  • Note and keep a record of consultations and research considered in crafting the policy and procedures
  • Train managers, hiring officials, and decision makers on how to implement the policy and procedures consistent with Title VII

Finally,  the EEOC and certain “Ban the Box Regulations” want the prospective employer and employer to talk to the candidate to inquire if there are mitigating circumstances that could be taken into consideration like considering: (i) the facts or circumstances surrounding the offense or conduct, (ii) an explanation if not convicted of the offense or if the record is otherwise inaccurate, (iii) the duration of time since the most recent conviction, (iv) whether the person is performing, or has performed, the same type of work, post-conviction, with the same or a different employer, with no known incidents of criminal conduct, (v) how long and whether the person has consistently been employed either before or after the criminal conduct, (vi) rehabilitation efforts—education, training and/or certificates of rehabilitation received since the criminal conduct, and (vii) employment or character references and any other information regarding fitness for the particular position applied for.

Context could make all the difference. Plus, a second look at a skilled candidate could turn into a positive.

Complete every step
Made a decision not to hire? Here’s where adverse action kicks in. Following each step matters—not just for your business, but for everyone involved.

You must first provide a pre-adverse action notice to the candidate to allow the candidate to review and/or dispute the information. Allow between 5 to 10 days for a response. Laws vary on the time required. Also consider performing an individualized assessment. If you still decide to take adverse action against the candidate, send the adverse action notice. Don’t forget: include the correct information, documents, and statements with your notices. (Get a more detailed example of the process here.)

Need help keeping up on all this? A partnership with ClearStar can help. Contact us to learn more and click here to stay updated on all the latest screening news.


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