January 22nd, 2018 | Debbie Lamb, Sterling Talent Solutions

Conducting Individualized Assessment as Part of the Adverse Action Process

When a company uses a job candidate’s background information to deny employment, they must comply with federal and state laws that protect the applicant from discrimination. One possible outcome of a background screening report is that an employer takes adverse action when choosing to deny employing a candidate based on the findings of the report.

One component of the adverse action process is called Individualized Assessment. In basic terms, it allows the candidate to provide additional information about their criminal history information to help employers determine whether the criminal history information is job related and consistent with business necessity, and then use it in making their final hiring decision.

What is Adverse Action?

Adverse action is “an action that denies an individual or business, credit, employment, insurance or other benefits. An adverse action is generally taken by a business based on a criminal past.” Adverse action regulations apply to new hire candidates who have been offered a position with a company on a conditional basis or current employees. When using consumer reports to make employment decisions, including hiring, retention, promotion or reassignment, a company must comply with the Fair Credit Reporting Act (FCRA). The Consumer Financial Protection Bureau (CFPB) enforces the FCRA. To be compliant, companies must follow a two-step process before they take any type of adverse action based on the findings in a consumer report:

  • Pre-Adverse Action Notification
  • Adverse Action Notification

Pre-Adverse Action Notification

The FCRA has specific rules that employers must follow if they have a third-party conduct employment background screening reports. The first step in the adverse action process is called the Pre-Adverse Action Notification.

Based on the FCRA, an employer must do the following before taking adverse action:

  • Advise the applicant it is thinking about taking adverse action based in whole or in part on information in the consumer report. This can be presented to the candidate orally or in writing.
  • Provide the candidate with the name of the consumer reporting agency who provided the background screening report.
  • Inform the applicant that they have the right to dispute any inaccurate or incomplete information in the report by contacting the consumer reporting agency or the employer.
  • Provide the candidate with a copy of their full background screening report.
  • Give the applicant a copy of the Summary of Your Rights Under the Fair Credit Reporting Act or any appropriate State Summary of Rights.

Waiting Period

Before taking adverse action and after giving notice that you are “considering” action, an employer must wait a “reasonable period” of time. The FTC has stated that five business days is reasonable. However, what is considered “reasonable” depends on how the notification is communicated to the applicant. The key is to the waiting period is to provide enough time so the applicant/employee can dispute the information before the employer fills the position.  There are also jurisdictions that have longer waiting periods.

Adverse Action Notification

After giving the Pre-Adverse Notification and exhausting the waiting period, an employer can take adverse action. When giving adverse action, an employer must give written notification to the applicant stating what action is being taken and what the decision was based upon, such as the criminal history in the background screening report findings.

The decision to start adverse action can be in whole in or in part on the findings of the consumer report, but it must come from the employer. With an adverse action decision, an employer must state the decision for adverse action was not made by the consumer reporting agency. The candidate can dispute the information in their report with the third-party consumer reporting agency. Also, the candidate has the right to ask for a free copy of the report within 60 days from the consumer reporting agency. If an applicant disputes the findings of the employment background screening report, then the adverse action process needs to be stopped.

Individualized Assessment

Individualized assessment is a 2012 Equal Employment Opportunity Commission (EEOC) recommended guidance that helps employers determine that exclusions due to criminal conduct are both job-related and consistent with business necessity. According to SHRM, “The goal of the EEOC guidance was to help people in demographic groups with higher incarceration rates get jobs and not be automatically excluded from the candidate pool due to a criminal history.”

  • The facts or circumstances surrounding the offense or conduct
  • The number of offenses for which the individual was convicted
  • The individual’s age at the time of conviction or release from prison 
  • Evidence that the individual performed the same type of work, post-conviction, with the same or a different employer, with no known incidents of criminal conduct
  • The length and consistency of employment history before and after the offense or conduct;
  • Rehabilitation efforts, e.g., education/training
  • Employment or character references and any other information regarding fitness for the particular position
  • Whether the individual is bonded under a federal, state, or local bonding program

Since each candidate and their potential criminal offenses are different, the EEOC guidelines ask employers to consider the circumstances surrounding the offense, the number of offenses for which the individual was convicted and rehabilitation efforts. Also, employers should look at evidence that the applicant performed the same type of work after their conviction with the same or a different employer without any criminal conduct incidents. It is very important to remember that employers need to be consistent with their individual assessment program with all candidates to be compliant with the guidelines.

Adverse Action Compliance

Always review with legal counsel all state and local regulations around the adverse action process. Follow each step of adverse action in the proper order. Send the pre-adverse notification, wait a “reasonable period” and then send the adverse action notification. Find out more about the adverse action process and how they affect the workplace by downloading an OnDemand version of recent Sterling Talent Solutions adverse action webinar entitled, “Employment Laws for HR, Part 1: Adverse Action Compliance.” Sterling also conducts a quarterly FCRA Compliance webinar series to keep attendees current on the latest FCRA compliance updates. Sign up for these very informative webinars today! Contact us for more information for Individualized Assessment and Adverse Action compliance.

Please note: Documents/presentations should NOT be construed as legal advice, guidance or counsel. Employers should consult their own attorney about their compliance responsibilities under the FCRA and applicable state and municipal law. Sterling Talent Solutions expressly disclaims any warranties or responsibility for damages associated with or arising out of this document/presentation or other information provided.

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.