The Report Says WHAT?

Aurico and its employees are not attorneys and cannot provide legal advice. Information contained in this article should be reviewed in consultation with your council. 

The Society for Human Resources Management (SHRM) found that a bad hire can cost a company up to five times the employee’s annual salary. This cost is frequently balanced against the need to fill a position or achieve time-to-hire goals. When a background check reveals findings that will limit a candidate’s hire, the next steps are critical and compliance is essential.

As a consumer reporting agency, our responsibility is to report factual information to help you make an individual assessment on each candidate. When a candidate’s information falls outside your hiring criteria, after considering all factors related to the position, the next steps are to implement the adverse action process.


“Adverse action” is defined in various laws passed by Congress, including the Fair Credit Reporting Act. For purposes of background screening, adverse action is required when there is a denial of employment. It is also necessary when any other decision is made for employment purposes that adversely affects any current or prospective employee based on a prepared consumer report (such as a background check).

Some companies handle the adverse action process in-house, while others request their background screening provider to handle the details. Some consumer reporting agencies include this service as a value-added feature while others charge a fee, but in either case it is the responsibility of the employer to ensure the process is completed.

Employers are required to send a pre-adverse action letter, copy of the background check and a statement of consumer rights to the individual. The Federal Trade Commission recommends that adverse action letters be administered at least five business days after the pre-adverse action letter. Massachusetts state law requires the adverse action letter be sent at least ten business days after the pre-adverse action letter.

If a dispute is raised, the consumer reporting agency will review and reinvestigate to resolve any discrepancies. The consumer reporting agency has up to 30 business days to reinvestigate their original findings, but typically a consumer reporting agency will complete the re-investigation within five business days.

If no dispute is raised, or when the dispute is resolved without report modification, the consumer is sent the formal adverse action letter. Only at time of final adverse action letter should the applicant be removed from the candidate pool.

Adverse action is an important component of your background screening program. With Aurico, you can feel confident that you have a partner who will work with you closely to provide support with this and other compliance areas.

Learn more: http://www.aurico.com/Solutions/Compliance.asp