Deciphering Pre Adverse Action When There's a Hit on a Background Check

If you conduct background checks as part of your due diligence, what should you do when you discover something negative?



Many employers choose to conduct background checks on prospective employees as part of their due diligence when hiring. From criminal histories and educational verifications to credit and employment history checks, background reports help scrutinize a potential employee before making the decision to hire them.

While each check plays a key part in building a complete picture of the candidate, what do you do when you receive a hit on an applicant’s background check?

Before I answer that, let’s first learn a little about background checks.

The Importance of Employment Background Checks 

In today’s work environment, conducting thorough employment background checks is critical to providing valuable insight into a candidate’s background. Not only do they help mitigate risk and foster a secure, trustworthy work environment, but they also ensure workplace safety and confirm the candidate’s qualifications.

Provide Safety and Security 

Conducting background checks offers insights into a candidate’s criminal history, which enable employers to: 

  • Mitigate potential risks 
  • Protect the well-being of employees, clients, and visitors 
  • Decrease the occurrence of workplace violence, theft, and fraud 
  • Reinforce the overall trustworthiness of the workforce 

While the risk may be low, your company could be held liable for negligent hiring if you knew or should have known that a convicted abuser was working for you. According to Lewis Maltby, President of National Workrights Institute in Princeton, N.J., “When an employer is held liable for negligent hiring, the reason is often because they did not conduct any background screening or review before they hired the employee involved." Source: 

Confirm Qualifications 

Unfortunately, being honest and forthright is not a quality shared by all candidates. By conducting background checks, you can easily validate the legitimacy of experience and credentials to ensure the candidate possesses the necessary skills, knowledge, and integrity for the job. 

Key Components of an Employment Background Check 

There are several key components that make up a comprehensive employment background check, including:

  • Criminal history 
  • Employment history
  • Educational qualifications
  • Credit history
  • Driving records 

These checks are often conducted with the help of a consumer reporting agency to ensure accuracy and compliance with legal requirements.

Each of these components provides valuable insight into a candidate’s background and suitability for applicable positions.

Criminal History 

A comprehensive background check should include a criminal history check. This provides details on any offenses for which the individual has been accused, prosecuted, or found guilty, including felonies and misdemeanors. This information aids you in determining the potential risks associated with hiring an offender, which helps avoid negligent hiring practices. 

Employment History 

Another vital aspect of a background check is the verification of a candidate’s past employment, which is oftentimes referred to as a reference check. This process involves contacting previous employers to confirm employment details such as job roles, duration of employment, and job duties, which helps you make informed hiring decisions. 

While some companies may have restrictions on what is said in an employment verification, you may be able to learn details about the applicant’s productivity, achievements, and setbacks. These details will help you validate different facets of the applicant’s work history and suitability for the role. 

Education Verification 

The background check process also includes verifying a candidate’s educational qualifications. By contacting educational institutions directly or requesting official transcripts, you can authenticate a candidate’s academic qualifications. 

Credit History 

Especially for roles requiring financial responsibilities, credit history checks are an integral part of the background check process. By evaluating an applicant’s financial responsibility and trustworthiness, credit history checks can help employers make informed hiring decisions. 

When performing a credit history check, you must ensure it is conducted in compliance with the Fair Credit Reporting Act (FCRA) to protect the candidate’s privacy rights. 

Driving Records 

For positions involving the operation of vehicles or heavy machinery, inspecting driving records is a crucial part of the background check process. These records provide details about a driver’s qualifications, driving history, and any traffic violations. 

By scrutinizing these records, you can assess the suitability and reliability of a candidate for roles that involve driving duties. 

Understanding Credit Reports and Financial Responsibility 

In the digital age, a credit report has evolved into an important tool for assessing a candidate’s financial responsibility. These reports, accessed through credit reporting agencies, provide detailed information about a candidate’s financial accounts and debt levels, which can significantly impact job opportunities. 

Credit Reporting Agencies 

The background check process heavily relies on the key role played by credit reporting agencies. Agencies like Experian, Equifax, and TransUnion provide detailed credit reports that give employers a comprehensive overview of a candidate’s financial history. 

This information helps employers assess a candidate’s financial responsibility and trustworthiness. 

Financial Accounts and Debt 

Important insights into a candidate’s financial responsibility can be gleaned from their financial accounts and debt levels. High levels of debt or a history of late payments can be potential red flags for employers, particularly for positions that involve financial responsibilities. 

Impact on Job Opportunities 

Note that a candidate’s credit history can have a significant impact on their job prospects. Poor credit history may lead to disqualification from certain job opportunities, particularly in finance-related roles. 

In short, candidates who want to maximize job opportunities should maintain a good credit history.

Laws for Using Background Checks for Adverse Action 

Now that we’ve covered some critical elements to background checks, let’s dive into what you should do when you discover something negative about a potential or current employee.

When you receive background information that may trigger your company’s policy for adverse action (such as not hiring a candidate or firing an employee), you must always comply with federal and state laws. These laws mandate that employers provide pre-adverse action notices to any current or prospective employee who may be affected by the findings of a background check.

While you may also be under state and/or municipality regulations, background checks are regulated by federal laws such as the Fair Credit Reporting Act (FCRA), the Equal Employment Opportunity Commission (EEOC), and the Fair Chance Act (“Ban the Box”).

Timing of When to Run Background Checks 

Background checks should only be requested after a conditional offer of employment has been made and the applicants have provided their signed consent; otherwise, you may be at risk of discrimination. When you are running a background check on an existing employee, perhaps because they have been promoted to a new position, you must have their signed consent prior to conducting the background check. 

Regulations per the FCRA 

The FCRA mandates that employers obtain a candidate’s consent before conducting a background check, with an explanation that the information may be used for their employment. You must also provide applicants with a summary of their consumer rights. 

Regulations per the EEOC 

The EEOC prohibits discrimination throughout the background check procedure. This means you cannot base hiring decisions on the person’s race, national origin, color, sex, sexual orientation, genetic information (including medical records), age, disability, military records (USERRA), or any other protected class. Any standards you set must be applied to everyone, meaning applicants with different ethnicities but similar financial histories must be treated the same. 

In addition, background checks must be conducted consistently for all those applying for a specific position. You cannot pick and choose who does or does not get screened. Conducting background checks for only a few people applying for the same position may appear as discrimination, particularly if they are only done on applicants of a certain race or other protected class. 

You must also be sure that your policy or practice for excluding candidates with certain information discovered on a criminal background check or credit check does not create a disparate impact. Disparate impact is unintentional discrimination that affects a protected group of people, even if the rule or action appears to be neutral. 

Regulations per the Fair Chance Act 

Federal contractors cannot ask about a job applicant’s criminal history prior to extending a conditional job offer, with a few exceptions like law enforcement and national security duties. Many states have similar “ban the box” laws that prohibit private employers from asking about arrests or criminal convictions prior to extending a job offer. 

Addressing Criminal Records and Convictions 

A sensitive yet crucial part of the background check process is addressing a person's criminal record and convictions. When considering these records, employers must take into account the severity of the offense, the time since the conviction, and its relevance to the job position. 

Severity of Offense 

Your hiring decision can be significantly influenced by the severity of the candidate's offense. Offenses such as theft, assault, or more serious crimes like felonies, can raise concerns about a candidate’s character and suitability for the job. Parking tickets, on the other hand, may be much less of a concern. 

Carefully consider the potential risks associated with the offense. 

Time Since Conviction 

You should also consider the time elapsed since a conviction, as the risk of reoffending decreases over time. This consideration helps ensure that the secure proceeding of the background check process is fair and equitable. 

Relevance to Job Position 

Evaluate whether the nature of the offense could potentially impact the candidate’s ability to perform the job. For instance, a driving offense may be extremely relevant for a role that involves operating a vehicle but has no relevance for a desk job. 

Your Responsibility Prior to Taking Adverse Action 

After you have carefully reviewed your internal processes to ensure full compliance with local and federal regulations, and have found an individual’s offense from a background check necessary for adverse action, there are steps you must take to allow the person a chance to contest any erroneous findings.

  1. Pre-Adverse Action Disclosure

The first step is to write a pre adverse action letter, also known as a pre-adverse action notice. Pre adverse action letters are a crucial part of the hiring process, ensuring transparency and compliance with FCRA guidelines. This explains that the results from their background check are grounds for a negative employment action, such as being denied employment or promotion.

After making copies for yourself, send the person a copy of the pre adverse action notices, the background check report, and a summary of the individual’s rights.

  1. Waiting Period for Review

Once the individual has received the required notification materials, allow them five days to follow-up. This gives them a chance to review and contest any background information that may be inaccurate.

If the person wishes to dispute the results, perhaps by providing documentation of dropped/reduced charges or records expungement, they must provide information to the screening agency and have a new background report produced. This new report determines their hiring eligibility, not the former report. For questions on how to proceed, please contact your certified HR expert.

  1. Adverse Action Notice

Once the individual has had a chance to respond to the pre-adverse action notice, you must review their response and determine whether it affects your decision about the negative employment action. If there is no change, you can move forward with providing the person your post adverse action notice that reaffirms your decision.

Be sure you properly place background check results separate from employee files with restricted access to ensure no unauthorized people obtain the individual’s sensitive personal information.

stratus helps with a pre adverse action



Employment background checks are an essential part of the hiring process. They provide valuable insights into a candidate’s history, which help you make informed hiring decisions. 

While the process can be complex, understanding the key components of a background check, recognizing the importance of legal considerations and discrimination concerns, and following the appropriate steps for taking adverse action will help you remain compliant and ensure fair evaluations. 

For more information, please contact your certified HR expert. Not a current Stratus HR client? Book a free consultation and our team will contact you shortly. 


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