The definition of “adverse action” is not limited to a denial of an individual’s application for employment. Rather, “adverse action” under the FCRA includes corrective or other disciplinary action taken against an applicant/employee based in whole or in part on a consumer report. An employer’s decision may “adversely” affect an employee even if his/her pay is not reduced. For example, according to the Staff Report, “an employee who is denied an assignment requiring a security clearance that is withheld in whole or in part because of a consumer report suffers an ‘adverse action’ in employment even if the assignment would not have raised the employee’s salary.” (Staff Report at 35.)
a) Two notices are required, if an employer takes adverse action against an applicant/employee based in whole or in part on information contained in a consumer report or investigative consumer report. The employer must provide a “pre-adverse action” notice under Section 604(b) before taking the adverse action and a subsequent “adverse action” notice under FCRA section 615(a) after the adverse action is taken. As a result, “the notices may not be included in the same document.”
b) Employers must provide a “pre-adverse action” notice even if the information contained in the consumer report (such as a criminal record) would automatically disqualify the applicant/employee from employment or otherwise lead to an adverse action based on the employer’s policies and procedures. (Staff Report at 53.)
c) The “pre-adverse action” notice must include a copy of the consumer report, the FCRA summary of rights, and any applicable state notices.
d) Where the employer does not have a “written” consumer report because the CRA provided the information to the employer orally, the employer may tell the applicant/employee orally what is in the report before taking adverse action. “Because the report itself is oral, an oral ‘copy’ is the proper method of compliance, as it conveys the information that Congress intended the consumer to know prior to suffering adverse action.” (Staff Report at 53.)
e) Once the employer provides the pre-adverse action notice, there is no specific period of time that an employer must wait before taking the adverse action against the applicant or employee. According to the Staff Report, employers must wait a “reasonable period of time,” but this will vary depending on the particular circumstances. Neither the FCRA nor the FTC has provided a bright-line test in this regard. However, based on existing case law, it is prudent for employers to wait at least five business days before taking the adverse action and providing the final adverse action notice. If an individual contacts the employer in response to the pre-adverse action notice to say there was a mistake (inaccuracy or incompleteness) in the consumer report, the employer may exercise its discretion whether or not to move forward with the hiring decision or engagement; the FCRA does not dictate a course of action.
f) Employers may provide the “adverse action” notice in a way that minimizes duplication with the “pre-adverse” action notice. For example, in the “adverse action” notice, the employer could note that the applicant/employee has already received a copy of the consumer report and the FCRA summary of rights.
(g) Although employers may arrange to have the CRA provide pre- adverse action notices directly to applicant/employee (i.e., outsource the process), the employer retains the ultimate liability. While some employers may want to be cut out of the process entirely, the decision in 848 F. Supp. 2d 532 (ED Pa 2012) indicates that this may be risky. The court held that the CRA’s pre-adverse action adjudication was actually an adverse action, because there was no opportunity for the consumers to contest the adjudication or change the outcome, and the process was missing the critical step of the employer making the final decision based on the full report and any information that the consumer may have provided to dispute the report.
(h) The adverse action notice must include the following:
• name, address and telephone number of the CRA that provided the report to the employer;
• statement that the CRA did not make the adverse decision and is not able to explain why the decision was made;
• statement setting forth the applicant’s/employee’s right to obtain a free disclosure of the report from the CRA, if the he/she makes a request for such a disclosure within 60 days; and
• statement setting forth the applicant’s/employee’s right to dispute directly with the CRA the accuracy or completeness of any information contained in the report that the CRA provided to the employer.