Pre-Adverse vs Adverse Action Notices – Timing, Content and Templates

When employers run background checks during hiring, they have to follow certain laws that protect job applicants from unfair treatment. One important rule is the Fair Credit Reporting Act (FCRA), which requires employers to notify job applicants if they find information in their background report that may affect the hiring decision. Employers must send two specific notices: a pre-adverse action notice and an adverse action notice.

Why Do Employers Conduct Background Checks?

During the hiring process, employers want to assess the applicant’s fit with the role. Not only do they consider skills, education, and experience, but they also want to make sure an applicant does not have any issues that would conflict with workplace safety, damage trust, or incur liability. For example, a bank may not want to hire someone convicted of embezzlement.

There are laws governing background checks such as the federal Fair Credit Reporting Act (FCRA), and state and local “Ban the Box” laws. The FCRA requires employers who use third-party background screening reports to notify the applicant and get written consent before conducting them. “Ban-the-Box” or “Fair Chance” laws, by contrast, prohibit employers from asking about criminal history or running criminal background checks until after an interview or a conditional offer of employment.

The rationale behind these laws is to prevent early-stage discrimination or screening out applicants based on background check results.

How To Conduct Background Checks

Types of Background Checks

The different types of background checks include:

• Criminal records

• Employment verification

• Credit checks (cards, etc.)

• Driving records

• Educational credentials

Using a Background Check Company

Under FCRA requirements, if an employer uses a consumer reporting agency, they must get written authorization from the job applicant before obtaining a consumer report. Any background check must be for employment purposes only and conducted through a compliant Consumer Reporting Agency (CRA).

Getting Consent

You must get written consent from an applicant or employee before conducting background checks. The FCRA requires a stand-alone disclosure document that is “clear and conspicuous” and an written authorization that the applicant signs. These should be separate documents.

Timing

Employers must know their state laws on when they can conduct background checks. For most states, questions about criminal history may be asked during the initial application or interview.

States with Fair Chance or Ban-the-Box laws, such as California, Colorado, Connecticut, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, and Washington only allow such questions after an interview or a conditional offer of employment has been made. However, these laws vary state by state.

Even if there is no statewide law, there may be local laws. For example, New York does not have a state law about timing of employment background checks, but New York City does have a “Ban the Box” law.

Workflow

Hiring managers may want to use the following workflow for FCRA compliance:

1. Extend a conditional offer of employment.

2. Get applicant’s written consent to conduct a background check.

3. Run report.

4. If there are negative findings, send a Pre-Adverse Action Letter and give the prospective employee a copy of the background check report.

5. Wait for applicant to respond by deadline.

6. If no response or no corrections are made, the employer may send a final Adverse Action Notice.

The Adverse Action Process

The pre-adverse notice allows the applicant to review and correct any inaccuracies on their report with the screening company. They are given a reasonable amount of time (commonly five business days) before a final hiring decision is made. Here is an example of a pre-adverse action notice:

Sample Template: Pre-Adverse Action Notice

Re: Important Information About Your Employment Application

Dear [Name of Applicant],

We are writing to inform you that we are considering a decision that may adversely affect your application for employment with [Name of Company]. This decision is based, in whole or in part, on information contained in a consumer background report obtained from the following consumer reporting agency:

[Name of Consumer Reporting Agency]

[Address]

[Phone Number]

Attached, please find:

• A copy of your background check report

• A copy of the Summary of Your Rights Under the Fair Credit Reporting Act

No final decision has been made at this time. If you believe any information in the report is inaccurate or incomplete, you have the right to contact the consumer reporting agency to dispute the report’s contents.

We will wait at least five (5) business days from the date of this notice before making any final employment decision.

Sincerely,

[Name/Title]

[Name of Company]

[Contact Information]

The final adverse action notice officially informs the applicant that the employment (or promotion) is being denied based on the background check’s findings. This notice is only sent after the waiting period on the pre-adverse action notice has expired and the applicant has not disputed or corrected the information in the employment screening. Here is an example of a letter that incorporates the adverse action requirements:

Sample Template: Adverse Action Notice

Re: Notice of Adverse Employment Decision

Dear [Name of Applicant],

After reviewing your background report and giving you the opportunity to respond, we regret to inform you that [Name of Company] has decided not to [hire/promote/retain] you for the position of [Job Title].

This decision was based, in whole or in part, on information contained in a consumer background report furnished by:

[Name of Consumer Reporting Agency]

[Address]

[Phone Number]

Please note that the agency did not make the employment decision and cannot explain why the decision was made. You have the right under the Fair Credit Reporting Act to dispute the accuracy or completeness of the report and to obtain an additional free copy of the report from the agency if you request it within 60 days.

Sincerely,

[Name/Title]

[Name of Company]

[Contact Information]

Common Mistakes In Background Checks

Employers often make critical compliance errors when conducting background checks, many of which can lead to legal liability and employment disputes.

• Asking questions about criminal history before extending a conditional offer of employment, per EEOC and FCRA guidance and especially in states with Ban the Box or Fair Chance in hiring laws.

• Not getting applicant’s or employee’s written consent for a background check.

• Not sending a timely Pre-Adverse Action Notice.

• Not waiting the specified waiting period for applicant’s or employee’s response before sending the final Adverse Action Notice.

By understanding these common mistakes, employers can comply with federal and state background check laws and maintain fair hiring practices.

Best Practices for Employers and Hiring Managers

• Understand state and local laws that affect applicants’ rights

• Develop a uniform background check policy

• Train team on FCRA rules and state and local requirements

• Create timing sequence: (1) Conditional Job Offer, (2) Applicant Consent for Background Check, (3) Background Check, (4) Pre-Adverse Notice, (5) Waiting Period, and (6) Adverse Notice

You may want to check with an employment attorney for legal advice to ensure your disclosures and notifications comply with local, state, and federal laws.

Disclaimer: The information presented here does not constitute legal advice or representation. It is general and educational in nature, may not reflect all recent legal developments, and may not apply to your unique facts and circumstances. Consider consulting with a qualified attorney if you have legal questions.