Adverse Action Notice Requirements for Employment or Rental Applicant?

As an employer who performs background checks for employment, you will often get negative reports on some candidates. This is also the case with landlords who perform background checks on tenants before renting them their premises.

You may find conflicting reports or criminal record history on applicants, or even a failed drug test.



Such findings mostly influence your decision to reject an individual’s application or dismiss them when you already had them in.


Before making such decisions, you need to know there are set guidelines and regulations.

According to federal law, it is your responsibility to inform the candidate about your decision to deny them the opportunity or dismiss them if employed through a document called an adverse action notice.


This article addresses what is required on an adverse action notice for employment or rental applicants. It also talks about the rights of a candidate who has been handed the notice.

Adverse Action is not a new term. It has been mostly associated with lenders and credit institutions that provide an adverse action notice to their loan applicants if their credit score is the reason their loan application is denied.


The Fair Credit Reporting Act (FCRA) governs the adverse action notice in these institutions, employers, and landlords.


As an employer, finding yourself on the wrong side of the FCRA could cost you financial penalties and lawsuits. The last thing you want for your business is to damage its PR.

What is an adverse action for employment?

Concerning background checks, Adverse Action is the decision you make based on the information you have found in the candidate’s background check report. This could mean making any decision that negatively affects their employment. It could be:

● deciding not to move on with their hiring process

● denying them promotion, transfer

● Employment termination

● Suspending an employee

Taking any of the above actions based on information from a background check requires you as an employer to provide the candidate with an Adverse Action Notice.

Steps Needed For Conducting An Adverse Action

Any company that uses consumer reports to make their employment decisions are required by the FCRA to comply with the laid requirements. Any wrong move and you may find your company in a serious legal war.


Even before reaching the adverse action process, the FCRA requires you to disclose your intention to conduct a background check on the candidate. The candidate must provide their consent and be informed that their background check results may potentially affect your decision.


Once the report is out and you have decided they are ineligible, the process of issuing an adverse action notice begins.

Here are the steps you should follow to conduct the right adverse action process.


After you have viewed the background check report and found reasons for dismissing an employee or denying a job to the candidate, you must first issue them with a pre-adverse action letter.


A pre-adverse action letter just informs them about the results and tells them how the report in their background check may negatively affect their employment decision.

However, the purpose of this letter is not to tell them about their disqualification. It only lets them see the results and allows them to contest, correct, if there were any mistakes, or discuss the report with you before you officially take the adverse action.


A pre-adverse action letter must have:


● Information about your intention to take adverse action based on the background check report.

● The rights of the candidate/employee as outlined by the FCRA.

● Have a copy of the report. Otherwise, inform them of their right to request a copy of the agency’s background check report within 60 days.

1. Send Pre-Adverse Action letter Sample of a pre adverse action letter for employment or rental property

DATE
NAME
ADDRESS
Dear (APPLICANT'S NAME):
A decision is currently pending concerning your application for (Add Employment or Housing) at our organization. The purpose of this letter is to inform you that there is information in the investigative consumer report that you authorized in regard to your application for (Add Employment or Housing) , which, if accurate, would prevent us from offering you (Housing or Employment) at this time.
Enclosed are a copy of the investigative consumer report and a copy of A Summary of Your Rights under the Fair Credit Reporting Act.
If you believe this report contains any information that is inaccurate or incomplete, you should contact the consumer reporting agency that prepared the report within five days so that the corrected information can be reviewed prior to an employment decision being made. Otherwise, we will assume that you no longer wish to pursue employment with us.
The agency that provided the background check report to us is:
Global Background Screening, LLC
3101 W. Market Street, #109-504
Johnson City, TN 37604
Office: (423) 500-4044
Toll Free: (855) 561-5890

Sincerely,
Human Resources Manager
Attachments:
Applicable Report(s)
A Summary of your Rights under the Fair Credit Reporting Act

2. Waiting Period

After sending the pre-adverse action letter to the candidate/employee, you have to offer them a reasonable length of time to review the documents. If they wish to dispute, correct mistakes, or respond to any part of the report, they can do so during this time.

While the FCRA outlines no reasonable standard time for the waiting period, most courts have outlined 5-7 days.


The Federal Trade Commission also provides five days from issuing the pre-adverse letter as the recommended waiting period.

3. Review the results

When the individual responds to the pre-adverse action letter, you have to review it to determine if their response could change your mind about their employment.

But if you still decide to go ahead with your prior decision to disqualify them, you need to deliver them an adverse action notice to explain your decision.

The adverse action notice may be delivered electronically or by hard copy.

4. Provide the adverse action notice

The adverse action notice informs the candidate that the adverse action has been completed and your decision has been made.

The adverse action notice must:

● Inform the candidate of their power to dispute the decision

● Offer to provide them with another free copy of the report within 60 days.

● State the hiring process was made by you and not the contractor if you outsourced the background check.

● Have the name and address of the Consumer reporting agency that conducted the background check.

● Disclose their credit score if it was one of the factors that negatively affected them.

You should also keep copies of all the documents for your record and future references if anything pops up.


Sample Adverse Action Notice For Employment and Tenant


Date Applicant Name Address
Dear (Applicant Name)
As part of your application for employment with (Insert Employer name), you authorized Global Background Screening LLC to conduct a background check. Recently, we sent you a copy of the investigative consumer report we received together with a summary of your consumer rights under the federal Fair Credit Reporting Act. Based in whole or in part on the information in the consumer report, we have decided to not offer a position of employment at this time.
The agency that provided the background check report to us is:
Global Background Screening LLC
3101 W Market St Suite 109-504
Johnson City, TN 37604
Global Background Screening LLC did not make the employment decision and cannot provide you with specific reasons why you were not hired. In accordance with state and federal law, however, you have the right to dispute with the agency the accuracy or completeness of any information in the consumer report furnished by the agency. You also have the right to obtain a free copy of your consumer report within 60 days from any consumer agency that maintains files on a nationwide basis.
Sincerely,
Administrator
Human Resources
Attachments:
Applicable Report(s)
A Summary of Your Rights Under the Fair Credit Reporting Act

5. Proper disposal of sensitive records

After the 60 days have elapsed and the candidate has not contested against the adverse action, by law, they will not be able to dispute it again. At this point, you are required to dispose of any sensitive documents that you have been keeping. The FCRA requires all employers to dispose of them by incinerating or shredding them. Any digital copies must also be erased permanently.

Adverse Action In Tenant Screening

The Federal Trade Commission (FTC) and FCRA point out that an adverse action is an act of denying housing to a rental applicant or deciding not to renew a lease agreement based on their consumer report information.

As a landlord, when conducting a legal tenant screening process, you can only take adverse action based on the individual’s income, checking references, credit report, criminal record, and speaking to their previous landlords.

Your decision must not be influenced by an individual’s race, color, political affiliation, sex, religion, disability, or national origin.

To prevent getting reported for discrimination, it informs the applicant why they were not approved to rent the property.

Adverse action Notices based on a credit report

If you reject a tenant based on their credit consumer report, you have to provide the Adverse Action Notice that informs them their credit report was the reason they were not approved.

Along with the notice, you are to provide the consumer reporting agency’s contacts and addresses to let the applicant access the information.

Adverse Action Notices based on Criminal report

Suppose you rejected a tenant based on information from their criminal report. In that case, you need to provide the applicant with an adverse action denial letter and how they can access a copy of the report.

Adverse action notices based on other forms of consumer reports

Just like the case of adverse action notice based on criminal records, you need to provide them with the adverse action denial letter and instructions on obtaining a copy of the consumer report.

Even if you do not approve the tenant based on other reasons not based on the consumer reports, make sure you do not rely on discriminatory reasons against the protected classes.

The FCRA also requires you to provide an adverse action notice to the tenant for any reasons they were not approved to rent.

EEOC Guidelines and how they must be followed

The Equal Employment Opportunity Commission (EEOC) is a federal agency authorized to enforce and interpret specific federal laws that prohibit employment discrimination against the protected classes.


This commission covers issues relating to the hiring process and the issues that involve the termination of employment. Such issues include promotions, workplace harassment, retaliation, and wages.


Employees who feel they have been discriminated against in violation of the EEOC enforced laws can file a charge with the EEOC. The agency will investigate the charge and attempt to resolve it without involving the court.


If the agency finds out unlawful discrimination instances, it will try to negotiate with the victim’s employer.


If it does not bear fruits, the EEOC may go ahead and file a lawsuit on behalf of the employee.

If their investigations find nothing wrong has been done by the employer, the employee can decide to file a lawsuit against the employee without the EEOC’s help.


The agency also tries to prevent employment discrimination through education, technical assistance, and outreach programs.


To help comply with equal employment opportunity requirements, EEOC issues detailed guidelines on particular discriminations related to employment.

EEOC Guidelines on the hiring process

The EEOC provides guidelines on how employers may choose to turn down a candidate. The guidelines ensure equal employment opportunities regardless of race, gender, age, national origin, and religion.


As per the EEOC rule, if an employer finds any disturbing report in a candidate’s background check report, they should consider the following before taking adverse action.


● Is the information relevant to the job duties and responsibilities?

● Does the position put the applicant in contact with the vulnerable population?

● Would the candidate access critical and sensitive data?

● How long has it been since the offense was committed?

● Did the offense result in a conviction?

● Does the job require a security clearance?

EEOC on arrests and conviction

The EEOC explains the differences between arrests and convictions.

Arrests are just records of arrest but do not prove any criminal conduct. They are often incomplete and erroneous and do not prove a person’s guilt.


On the other hand, convictions are considered sufficient evidence of criminal activity. While they may still have errors, adverse actions based on convictions records must clearly show the candidate’s dangers and risks when given the job.

EEOC recommends employers omit questions about criminal records in their job application forms. It should only come into play later during the selection process after the candidates have had the opportunity to prove their strengths.

EEOC Laws

The EEOC interprets and enforces specific federal laws:

Title VII

Title VII of the Civil Rights Act (1964) is a federal law that bans employment discrimination based on color, race, sex, origin, or religion. (federally protected classes).

Title VII law covers the whole employment process from application to termination.

It also bans retaliation against any employee because they have filed a lawsuit against the employer or have taken part in a lawsuit or investigations.


Title VII also requires employers to accommodate different religious beliefs held by job applicants and employees unless it severely affects their operation.


This law also bans sexual harassment and discrimination in workplaces. Physical and verbal of sexual nature become sexual discrimination if it negatively affects the employer.


The victim does not have to be the direct target. Even another employee who is negatively affected is treated as a victim.

Pregnancy discrimination act

Title VII was amended in 1978 to ban workplace discrimination based on pregnancy specifically.


The employer cannot discriminate against women based on pregnancy and childbirth or any medical condition related to both.


This act also prohibits employees from retaliating against such employees when they file discrimination charges, take part in a lawsuit, or any investigation against the employee.

Equal Pay Act

The Equal Pay Act requires the employee to provide equal pay to both genders who hold similar workplace positions.


The pay does not just refer to salaries, but also bonuses, overtime, stock options, and profit-sharing.


Similarly, it also bans any forms of retaliation for any reason from the employer when a discrimination charge is filed against them.

Age Discrimination in employment act

The ADEA prohibits the employer from discriminating against applicants and individuals who are 4o years and above.

According to ADEA, if an employer favors an employee against the other, and both are at least aged 40, the employer has not broken any law.

This law prohibits age-based harassment. The harasser does not have to be the employer or someone who works for them, it can be the client.

Americans with disabilities act

Title I of the ADA prohibits employers from discriminating against qualified applicants and employees based on disability.


Disability, according to the act, is any form of physical or mental impairment that limits at least one life activity like seeing, walking, or sleeping.


This act also covers employees with records of such disabilities.

The ADA laws cut across all employment spheres, including hiring, employment termination, benefits, and compensation.


If an employer files a discrimination claim, they have to show they have the disability and qualify for the job they seek or hold.


Employers need to provide services for people with disabilities that they need for their productivity. It may include providing sign language interpreters for the deaf during job interviews, Providing braille in the blind’s office, and more.

Handling Discrimination Complaints

As an employer, when your employee presents an internal complaint of their discrimination or harassment:


● Respond promptly and effectively to avoid legal actions being taken.

● Take the complaint seriously and never conclude hastily whether it is worth investigating.

● Keep an open mind and investigate the claim while observing whether there have been EEOC law violations.

● Show respect, empathy, and compassion to the accuser. It helps in reaching a smooth resolution.

● Document every part of your investigation to the end in the form of writing.

● Keep details regarding the complaint confidential to prevent rumors from spreading in your workplace.

● If there are laid internal procedures to follow to solve such cases when they arise, ensure the whole process is followed to the end.

● If the claim is substantiated, appropriate action must be taken.

● Do not retaliate against employees because they submitted their discrimination or harassment claims.

What happens if the employee bypasses the applicant/employer and goes straight to the EEOC?

Some applicants/employees may choose to go directly to the EEOC and submit their claims. When this happens to you as an employer:


● Carefully review the “Notice of a Charge of Discrimination” you will receive from the EEOC.

● Respond to the notice with a statement often known as the “Position Statement.” Tell your side of the story.

● Cooperate with the EEOC through their investigation, even if the charge seems meritless to you. Provide any additional information the agency may request from you.

EEOC Retaliation guidelines

The EEOC has made sure that all applicants and employees feel free to complain if they face any kind of discrimination or harassment without fearing that the employer may take action to punish them.


The agency has therefore banned any form of retaliation against employees for any reason.


● Employees cannot be punished for submitting complaints against discrimination or harassment, taking part in investigations, or lawsuits.

● As an employer, you should remember that retaliation is a separate chargeable offense.

● The EEOC recommends that employees create a written policy that prohibits retaliation in the workplace.

The policy must include examples of prohibited retaliation, steps to take to avoid retaliation, reporting mechanism, and an explanation that employees who retaliate can face disciplinary measures.


Finally, the EEOC recommends that employers have an individual review the proposed disciplinary measures to ensure they are not retaliatory in any form. The individual can be a management official in the organization or a counsel.

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