What is Adverse Action?
In the context of background checks, Adverse Action is any action you take based on the information in a background check report that negatively affects someone’s employment. This could mean denying them employment, but can also include denying a promotion or transfer, offering employment in a lesser position, or other negative outcomes.
Because Adverse Action adversely affects consumers (by nature), it is a common area of litigation and compliance risk for you. In fact, the Fair Credit Reporting Act (FCRA) requires that you follow certain procedures if you decline to hire, engage, or promote a candidate on the basis of information contained in a background report.
Why is it important?
The Adverse Action workflow is critical because it allows the candidate to raise any concerns about their report, and the FCRA requires that employers/end users (which includes companies that use independent contractors) follow this stringent process.
Some employers are tempted not to communicate with candidates whom they decline. However, if you don’t follow a defined and consistent Adverse Action process, you’re opening yourself up to legal risk.
The potential risk of a lawsuit acts as a significant motivator for employers to make sure that their background check procedures are in compliance with the FCRA. Adverse action litigation can result in some serious payouts.
Aside from the compliance risk, it is also possible for an error to occur within a background check report. You should want to ensure that you are doing the right thing by your applicants and following the process accurately in order to make sure you are utilizing the proper information in your consideration.