When any US employer considers not moving forward with a candidate because of information in their background check, the Adverse Action process comes into play. While this procedure has long been required under the Fair Credit Reporting Act (FCRA), many states and municipalities have recently added their own rules—making compliance more complex than ever.
Employers who misunderstand or overlook these requirements risk legal challenges, fines, and damage to their reputation. To stay compliant, it is critical to understand both the federal framework and the state/local variations that apply to your hiring process.
Key Best Practices for Hiring Managers
- Collaborate with Legal Counsel
Regularly review your screening policies with legal experts to ensure they align with federal, state, and municipal requirements. Laws are evolving rapidly, and periodic updates are essential.
- Consider Multiple Jurisdictions
It’s not only the candidate’s current residence that matters—also consider where the person will work. Each state (and in some cases, each city) may have its own rules governing the Adverse Action process in allowing a candidate’s right to dispute negative information.
- Watch for State-Specific Requirements
Some states, like California and Illinois, require additional notices or documents to be sent before or during the Adverse Action process. Understanding and following these requirements is crucial for compliance.
- Provide Documents Promptly
Candidates must receive:
- All required notices.
- A copy of their background report.
- Summary of Rights document
Employers should document the date and time these materials are sent, creating a clear compliance trail.
- Allow Reasonable Time for Disputes
The FCRA requires employers to give candidates an opportunity to dispute information. While “reasonable” is not specifically defined, a best practice had previously been to allow at least 7 business days. However, allowing for 10 business days may be a better best practice, as ten days aligns with several current state and municipal Ban the Box laws.
- Train Hiring Teams
Employers with multiple offices or state operations must ensure that all hiring managers understand the Adverse Action process and the specific regulations in their jurisdictions. Regular training minimizes risk and ensures consistency.
The Bottom Line
The Adverse Action process is a critical part of fair hiring. It protects candidates while also protecting employers from liability. While federal guidance, such as the FTC’s employer background check resource, provides a foundation, employers should supplement it with state-specific knowledge and legal advice.
By taking a proactive approach—reviewing policies, providing proper notices, and allowing candidates a fair opportunity to respond—employers can maintain compliance, reduce risk of class action lawsuits, and ensure hiring practices remain fair and transparent.
Posted by: Rudy Troisi, L.P.I., Founder, CEO, Reliable Background Screening and Dr. Alan Lasky, SVP Client Success & Partnerships.
This content is for informational purposes only and not legal advice or binding case law. Consult qualified legal counsel for assistance.
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