If your company has job vacancies to fill, it is a pretty standard procedure to run an employment background check utilizing a consumer reporting agency (CRA) that compiles employee background screening information.   After receiving all the employee background check data from the employment screening company , the Human Resource Department will then make a hiring decision. If employment is denied based on any information from the Employee Screening Report, adverse action MUST be taken.  

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Adverse Action 101

If the words “Adverse Action” still cause you confusion and your hiring process does not include any adverse action procedure, you are at an extremely high risk for a lawsuit.  Stop what you are doing and contact your employment attorney right now!

The Fair Credit Reporting Act (FCRA) requires employers and businesses to:

  • Send a pre-adverse action notice and an adverse action notice to the job applicant
  • Inform job applicant the reason(s) they were denied employment
  • Provide the name, address, and toll-free phone number of the CRA who provided the report

The pre-adverse action notice can be oral, by phone, or in writing and must be sent immediately upon the adverse action decision, notifying the applicant that action is being taken.  However, it is not recommended that an oral pre-adverse action notice is given due to lack of proof.  No one wants to get into a “he said, she said” scenario.  Documentation is key.

The final adverse action notification must be sent after the 5th business day (at minimum) from the initial notice. This allows the applicant time to dispute these findings with both the CRA that provided the data and the employer.  There are no defined maximum days for the employer to allow the applicant to dispute.  Most employers have their own policy on the lapse of time for disputes.  Make certain these policies are in place and implemented within your hiring practices.

The employment-based adverse action notice must include a statement letting the applicant know where he or she can obtain a copy of their consumer report free from the agency listed in the notice within 60 days. The notice will also state that the consumer reporting agency, and the credit reporting agency were not involved in the decision and that these bureaus cannot tell you why your application for employment was denied.

Finally, the adverse action notice will include a Summary of Rights to dispute inaccurate or incomplete credit report information. This will list a toll free phone number as well, and address of the consumer reporting agency, giving the applicant an opportunity to dispute any errors in the report.


Kandi Chapman is President and Founder of MBI Worldwide, an employment background screening firm.  She has been nationally honored and recognized by The National Women Business Owners Corporation and was honored as  one of St. Louisans Top 100 People To Know To Succeed In Business in 2015.  


Disclaimer:  Please be aware that MBI Worldwide (Midwest Backgrounds, Inc.) is not a law firm and all policies should be reviewed by an HR/Employment attorney for your companies’ best practices and all legal procedures, even if you are currently a client of MBI Worldwide. Do not use this article, or anything published from MBI Worldwide  as legal advice or inclusively for your screening policy.

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