What’s Your Process for Applicants That Fail Their Employment Background Check? 17 May 2019


You’d found the perfect candidate. You were getting ready to add the person to your staff when the background check results revealed a deal breaker. Now what? Can you just toss that application and move on to the next?

Not so fast! If you don’t hire an applicant because of a failed background check, you have to inform the job candidate. Legally, you need to follow an adverse action process to notify them. Ignoring candidates or simply telling them they didn’t get the job can leave your business open to lawsuits.

Petco was sued for failing to send applicants an adverse action notice and had to pay a settlement of $1.2 million. Most small businesses don’t have that much cash lying around. Using an adverse action process can protect you from costly lawsuits.

Adverse action comes with strict legal requirements, but don’t let that scare you away. Having the right procedures in place can benefit your hiring process. Let’s find out how and also discover how you can create your own process.

An Adverse Action Process Keeps Your Business Out of Legal Trouble

Some business owners feel uncomfortable telling a job applicant they failed a background check. However, federal law requires you to notify an applicant if they aren’t hired based on a background check.

The Fair Credit Reporting Act (FCRA) requires you to go further than just informing candidates. It sets specific standards for how you should notify them. Failing to follow the FCRA’s rules leaves your business vulnerable to lawsuits.

The FCRA’s standards aren’t the only ones you have to worry about. The Equal Employment Opportunity Commission provides guidelines for candidates with criminal histories. Following these guidelines gives each applicant a fair chance at being hired and keeps you out of legal trouble.

An adverse action process protects your business from legal issues, but it does more than that. It helps you make better hiring decisions.

Business owner creating an adverse action process for hiring

Using an Adverse Action Process Helps You Make the Right Decision

The adverse action process stops you from making hasty hiring decisions. Instead of deciding immediately, the process forces you to wait and allow the candidate to respond.

Response time gives the applicant a chance to correct inaccurate information. It also allows them to explain the circumstances surrounding the incident. Once you have all the facts, you can make the right decision.

As a result, an adverse action process is beneficial to your business. It opens up your hiring pool to talented people you may have overlooked. Instead of a blanket ban on criminal records, adverse action lets you consider each applicant’s record individually.

How can you create your own adverse action process?

Your Adverse Action Process Should Be Legally Compliant

An adverse action process needs to comply with various laws and general best practices. Here’s how you can make your own adverse action plan:

  • Send a pre-adverse action notice before making a hiring decision. Inform the candidate you’re considering adverse action based on their background check results. You can send this notice in the mail or by email. Some states require a statement of the applicant’s rights under the state’s credit reporting laws.
  • You also need to send three items, including:
    • A copy of the background check results
    • The name and contact information of the screening company you used
    • A copy of “A Summary of Your Rights Under the FCRA”
  • Wait 5 to 10 business days. A waiting period gives the applicant time to dispute any inaccuracies or explain the results. Keep in mind that some cities and states require a longer waiting period than others. Research your state and local laws before deciding on your waiting period.
    Remember that hiring another candidate for the job during this time counts as a final hiring decision. So, be sure to wait the required length of time to avoid being sued for not following the adverse action process.
  • Conduct an individualized assessment of the candidate and their history. If the applicant has a criminal record, take into account the nature of the crime, how long ago it was, and how the crime relates to the job position.
  • Once the allotted time has passed, weigh all the new information. If you still decide not to hire, you have to send an adverse action notice. Include the name, contact information, and address of your screening company.
  • You also need to include three other statements explaining that:
    • The screening company didn’t make the hiring decision.
    • The job applicant has 60 days to request a free copy of their consumer file from the screening company.
    • The job applicant has the right to dispute the accuracy of the background check with the screening company.

Your business might already have a hiring process. An adverse action process can fit right in with your existing hiring system. Do you have the right process in place?

What’s Your Process?

You may not know what to do with that “perfect” job applicant, but an adverse action process makes the decision easier. Using an adverse action process protects your business from legal trouble. It also forces you to think in depth about your hiring decisions.  

Creating a legally compliant adverse action process doesn’t have to be complicated. Just a few necessary steps will protect your company from legal problems and give talented applicants a second chance. Take the frustration out of hiring decisions by creating and using an adverse action process.