Adverse Action Notice

Are You Hiring? Then You Need to Understand Adverse Action in the Workplace.

If your hiring process involves conducting background checks on job applicants (and it should), then you need to understand adverse action in the workplace. You must also make sure your organization complies with relevant federal and state laws, including the Equal Credit Opportunity Act (ECOA) and Fair Credit and Reporting Act (FCRA).


What is Adverse Action?

The word "adverse" means "harmful" or "unfavorable." So an adverse action is a harmful or unfavorable action taken against a person (or sometimes a business). The action itself is typically the denial of credit, insurance, employment, promotion, or some other benefit due to the person's credit and/or criminal history.

As an employer, you are required by law to inform job applicants that you will be conducting credit and criminal history checks as a basis for their employment. You are also required to get their explicit consent regarding these background checks.

What Do You Need to Keep in Mind Regarding Adverse Action?

If you plan to reject a job applicant due to information obtained on a background check, you are also required by law to inform the job applicant via a pre-adverse action notice. This notice should include a copy of the check and a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act."

At this point, the applicant has a certain amount of time (usually five business days) to review the check and dispute any findings.

If the applicant does dispute any findings, you and your vendor that performed the check must reinvestigate all the disputed information in a timely fashion. If there are errors/incorrect information, the check itself must be corrected, and a new copy must be given to the applicant. Only after you've taken these steps can you legally send the job applicant a final adverse action notice.


Why Does Adverse Action Even Exist?

Reporting mistakes DO happen (e.g., clerical errors in the courts). It would be a shame to pass on an otherwise excellent job candidate due to an erroneous report on a criminal history or credit check. Adverse action protects consumers, but it also helps employers feel confident in their hiring decisions.


Adverse Action Compliance—How Hard Is It?

Adverse action is a complex topic that involves federal law and ever-changing state laws. The above is a basic overview (and shouldn't be taken as legal advice). Compliance requires vigilance, expertise, and constant awareness about changes in the laws and regulations.


Good Egg's Candidate Portal Streamlines the Process

We know following regulations is tedious, but it's the law. To help streamline things, Good Egg's adverse action process is 100% electronic. Employers initiate and complete adverse action online. Candidates like it as well, since it expedites the process and they can access it on their mobile devices.

Our adverse action process helps you comply not only with federal requirements, but also with ever-changing state requirements.

With Good Egg, you can count on:

  • Proper authorization and consent from job applicants
  • Compliance with required waiting periods for pre-adverse action notifications and final adverse action notifications
  • Quick responses to disputed findings, thorough reinvestigations, and proper corrections to any errors
  • Respectful interactions with job candidates
  • Excellent technology that records everything securely and that makes it simple for you and your applicant to review information
  • Awareness and knowledge of applicable federal and state laws governing adverse actions

Bottom Line

We make it simple and straightforward to hire good eggs. Learn more about our overall approach.