HR Professionals must walk a tightrope. They must screen out unqualified or dangerous job candidates, while ensuring their screening processes are fair, relevant, and don’t discriminate.
Creating and maintaining a successful background screening process is crucial. Unfortunately, employers frequently make mistakes. These include not screening for criminal history outside the state the client resides, not searching AKA’s, and failing to verify a candidate’s claims of employment and education closely enough.
However, none of these are the biggest mistake employers can make, which is mishandling job seekers they don’t hire.
What Does the Fair Credit Reporting Act (FCRA) Say About It?
The FCRA considers background checks for employment purposes as a “consumer report”. It mandates that employers comply with the requirements if they use background checks in their hiring decisions.
What Is a Consumer Report?
A consumer report is "any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part to serve as a factor in establishing the consumer's eligibility" for credit, insurance, or employment purposes.” The FCRA extends to criminal records, civil lawsuits, reference checks, and other information obtained by a consumer reporting agency to screen an applicant’s background. The FCRA has civil and statutory penalties for those who don’t comply with their requirements.
What Does Adverse Action Mean?
Adverse action means that you, as an employer, choose not to hire a person.
Why Is It Considered One of the Costliest Mistakes?
Failing to follow the FCRA’s rules regarding not hiring job candidates is one of the easiest ways to get your company sued for big bucks. Amazon, Wells Fargo, Petco, Avis, and Dollar General are a few of the many companies that have been hit with multi-million-dollar lawsuits regarding the way they handled candidates they didn’t hire. Avoid the negative effects such litigation would have on both your company’s bottom line AND reputation by practicing Adverse Action compliance.
While we aren’t employment attorneys, here is a list of the best practices employers can use to build a compliant process for handling candidates they decide not to hire.
Steps for a Compliant Adverse Action Process:
Designate Hiring Guidelines in Advance
Consistency is key to maintaining a compliant background screening process. HR should designate the types of screening used for specific positions and the information that would cause your company to take adverse action against a job seeker. Document this procedure and make sure everyone involved in the hiring process adheres to it.
However, making decisions using the information on a background report isn’t a set-it-and-forget-it process. Be sure to…
…Use Individualized Assessments
Individualized assessments are required or strongly suggested by state and local regulations and the EEOC. When you use a job candidate’s background information to make a hiring decision, you need to consider the specific circumstances surrounding the offense. The EEOC guidance deems these circumstances as important factors to consider:
- The nature and gravity of the offense
- The time that has passed since the offense, conduct, and/or completion of the sentence
- The nature of the job held or sought
Factor the recency, severity, and relevancy of the offense into the hiring decision. For example, a criminal conviction that happened a year ago may keep you from hiring a candidate, while the same conviction that happened 15 years ago may not affect your decision.
Notify the Applicant
If you’re considering taking adverse action (not hiring) on an applicant because of information in their background check, you must notify them in writing. This document is called the “Pre-Adverse Action Letter”.
The Pre-Adverse Action Letter needs to include the name and contact information of the background screening provider that compiled the report.
- a “Summary of Your Right Under the Fair Credit Reporting Act”.
- a statement notifying the candidate they are entitled to a copy of their background check at no charge.
- a statement that the background screening provider did not decide to take adverse action.
The Applicant May Dispute the Information
The applicant has the right to contact the background screening provider and dispute the information on their background check. The provider will investigate the disputed items and, upon completion, send an updated copy to the applicant and the employer.
Re-evaluate the Information and Decide
Once you receive a copy of the updated report (if the applicant disputes information), review the report, and make a final decision. It’s important to note that employers are NOT required to hold a position open until the dispute is settled.
Take Final Adverse Action
If you move forward with your decision not to hire the candidate because of the information in the background report, send a “Final Adverse Action” notice. There must be ample time (5 business days or more) between the Pre-Adverse Action and Final Adverse Action notices. This window gives the candidate a chance to dispute the adverse information.
Employers must prioritize staying in compliance with the way they handle applicants they don’t hire due to background information. The FCRA can levy fines of up to $1000 per violation. The candidates can also sue and win millions of dollars in damages. The stakes are too high to chance a haphazard, inconsistent adverse action process.
Avoid the mistake of being out of compliance with your company’s adverse action processes. By proactively understanding the requirements, you can implement a fair, consistent procedure that minimizes the chances of getting fined or dealing with expensive lawsuits.