What To Do When a Background Check Comes Back With Red Flags



If you perform a background check and the information you discover prevents a candidate from working at your company, what do you do? 

This is a question many employers ask themselves whenever trying to acquire new talent. If you find yourself in this situation, you’ll need to begin the pre adverse action process. 

Federal law states that employers need to go through a step-by-step process if they wish to deny employment based on information from a background check. The same process is required if a company wishes to terminate an employee under similar circumstances. 

Why Is It Important To Know About the Adverse Action Process?

Employers need to run background checks to protect the integrity and safety of their company culture. 

In some cases, information may cause a company to reject employment from a candidate. Owners and hiring managers must understand this process to protect their business from a serious lawsuit. Large corporations have paid millions of dollars in settlements due to not following the process correctly. 

Knowing and understanding how to deal with an adverse action will ensure you’re compliant and won’t have to deal with any expensive lawsuits. 

How To Conduct a Compliant Adverse Action Process



Step 1: The Pre Adverse Action Process

This part of the process includes informing the job candidate that you no longer wish to move forward with their application due to information from their background screening. You’ll have to provide a full copy of the background check report along with a federal notice to be compliant with the Fair Credit Reporting Act (FCRA). 

Candidates then have the right to dispute any claims or results from the screening. 

Step 2: The Waiting Period

During this phase, you must allow at least five business days for the candidate to dispute any claims. You can’t officially reject their application without giving a reasonable period. 

Step 3: Official Adverse Action Notice

After waiting the required five days and if the candidate doesn’t raise any disputes, you can then give your official post adverse action notice that you’re rejecting their application due to information on the background check report. You’re required to send out an adverse action letter to the candidate and any other materials deemed necessary.

The final adverse action letter is extremely regulated and must contain certain sentences. To ensure you’re compliant with the FCRA, consider working with a professional background checking company that understands all the processes. 

Additional Tips for Staying Compliant

The adverse action process is incredibly delicate that requires full attention. 

As a result, you’ll need to ensure everyone in your business that handles recruiting new employees understand the three steps above to avoid any issues. What’s more, your work is extremely important when rejecting applications. If someone in your business uses the wrong words, you can expect negative reactions from applicants. 

If you plan on rejecting a candidate, be sure to never verbally state you’re not accepting employment until the adverse action process is complete.

Companies should also be careful if they’re automating the adverse action letters. While this may help speed up the hiring process, it can create severe complications. You’ll need to do the right things to ensure each letter suits the candidate and job position individually. 


Running background checks is an extremely helpful way for companies to find the right people to help them grow. However, not everyone is going to check back without any discrepancies. In the case where there are red flags, knowing how to handle the adverse action process will ensure you can reject bad candidates without any repercussions. 


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