Create a Hassle-Free, FCRA Compliant Dispute Resolution Process

By Robert Capwell Jul 17, 2008
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The information contained in a background screening or consumer report can sometimes be the tipping point for an employer to determine whether to extend an employment offer to a job candidate or even continue employing a current worker. Likewise, a change in current employment or job eligibility attributable to negative information cited in such reports ultimately can create anxiety, embarrassment and even anger for a person. So developing a well thought-out dispute resolution process that is compliant with the Fair Credit Reporting Act (FCRA) is one of the most important aspects to alleviating misunderstandings and potential litigation. It also will provide the subject with a complete understanding of the laws and guidelines for correctly disputing adverse or negative information.

Pre-Dispute Prep Work

Before an employer gets to the point of a potential dispute, a number of steps should have been taken. The key is for employers to provide as much disclosure and documentation as possible regarding FCRA pre-adverse and adverse action guidelines up front to job candidates or employees to help minimize potential future confusion and any misunderstanding of the company’s dispute resolution process.

Case in point: Suppose a company receives the written authorization to perform a background check on an applicant named J. Smith. The company’s HR department has then provided Smith with a copy of A Summary of Your Rights Under the FCRA, which provides the subject with additional information regarding possible disputes and steps for resolution even before the background check has been conducted. It also includes contact information for government agencies that can provide additional information and guidance.

The background check on Smith is subsequently conducted and the consumer report provided by the background screening vendor contains adverse information regarding a criminal record. Based on the company’s documented adjudication policy—procedures that outline the policy for dealing with the use of criminal records as they relate to the hiring process—Smith is no longer eligible for consideration based on the information contained in the consumer report.

As a result of this decision, the pre-adverse action process must be triggered and the applicable FCRA letter (Pre-Adverse Action Notification) should be sent to Smith along with a copy of the consumer report. The letter should state that a background check was conducted and potentially adverse information was obtained, so the subject is now considered ineligible for the open position based on that information. It should include the background screening firm’s name and contact information, including the vendor’s complete address, toll-free phone number and e-mail address, if applicable.

An employer’s background screening partner can provide the summary of right under FCRA and sample copies of Pre-Adverse Action and Adverse Action Notifications. In addition, keep in mind that state statutes may require further documentation or added procedures to comply with this process. Check with the company’s legal counsel that oversees HR and employment-related matters for further information in your state for proper compliance.

Obtain a mail delivery or e-mail confirmation to be certain that the subject has received the pre-adverse action notification and consumer report copies. The information can be sent to the subject via overnight mail, regular mail or e-mail, depending on internal processes. In addition, be sure that the consumer report does not include sensitive information, such as a complete Social Security number or entire date of birth, to ensure consumer privacy and security.

Next Step: The Waiting Game

Once the Pre-Adverse Action Notification has gone out to the subject, the next tricky step is for the company to wait. Always provide the subject of the report ample time to dispute information contained in it. The FCRA does not specify how long an employer must wait after the pre-adverse action notification is sent before taking adverse action; that is, moving on to the next candidate or removing the subject from employment. However, according to the Federal Trade Commission (FTC), employers should keep in mind the clear purpose of the pre-adverse action process and the provision to allow consumers the opportunity to discuss or dispute information contained within the report or otherwise respond before adverse action is taken. Therefore, the applicant must have a meaningful opportunity to review the information and to respond. A past FTC Opinion Letter further clarifies the requirement and suggests five business days as a reasonable amount of time for a response. If the employer falls under the requirements of the U.S. Department of Transportation, three business days should be allowed.

“Innocent before proven guilty” should always be on the mind of a decision-maker while waiting for the consumer to respond from the Pre-Adverse Action Notification. Always treat the consumer with the utmost respect, particularly when using a consumer report as part of the basis for deciding whether to terminate a current employee. By not providing individuals ample time to respond and tell their side of the story, an employer is disregarding the FCRA’s entire adverse action process, which could put the company at greater risk for litigation.

Response Follow-Up

Now let’s assume that Smith has responded to the Pre-Adverse Action Notification and disputes the information contained in the consumer report. Smith can send the dispute request to the employer or to the background screening firm that reported the information. In any case, Smith has supplied additional court docket information in response to the Pre-Adverse Action Notification that disputes the criminal record originally reported by the consumer reporting agency. The criminal court docket states clearly that the case had been dismissed; however, at the time the record was searched, the court docket was not updated with the disposition of dismissal.

As a result of the dispute and provided documentation, a re-investigation is conducted by the background screening firm and/or the consumer reporting agency. At the time of re-investigation, the consumer reporting agency discovered the error made by the court and updated the record. The consumer report is then modified with the updated disposition; Smith and the potential employer are notified of the re-investigation results and an amended report is sent to both parties. At this point, Smith again can be considered for employment with no adverse information being considered or reported as part of the hiring decision.

When disputes are noted, always require the job applicants or the employees to supply sufficient information, such as current court docket information, written testimony or sufficient evidence that substantiates their claim that the criminal record is not related to them. The same substantiation documentation practice should be adhered to when disputing non-verified education credentials or employment verifications along with any other disputed information.

The dispute should be submitted in writing, documented by the human resources department and dated for the official file. If the employer receives the request, the company should forward it immediately to its background screening provider for re-investigation. Within five business days, the background screening provider is obligated under the FCRA to start a re-investigation. Within 30 days from receipt of the notice of a dispute, the background screening firm and/or consumer reporting agency must:

• Conduct a reasonable re-investigation.

• Determine whether the disputed item of information is inaccurate, incomplete or unverifiable.

• Record the current status of the disputed item of information.

    This period may be extended by 15 days if the job applicant or employee is required to submit additional relevant information during the 30-day period. Finally, no fee can be levied by the background screening firm to the employer or the subject for a re-investigation. Generally, background screening firms will work through this process expeditiously and conduct a re-investigation promptly to serve their client better and shorten the resolution timeframe.

    Flipside to this Dispute

    If the scenario of J. Smith was reversed and the original criminal conviction was proved accurate and upheld, the employer would then move to the adverse action process. That is, the employer would send out an Adverse Action Notification letter stating clearly that adverse action is being taken based on the re-investigated report and that Smith is not eligible for hire because of the information found during the background investigation. A copy of the FCRA summary should accompany the letter, as well as another copy of the consumer report/background check.

    At this point, the subject may request a description of the re-investigation procedure and additional information about the source that furnished the information. The employer’s background screening firm should be able to provide this information; however, it is advisable to have the company’s dispute resolution policy in a communication method available to job candidates and employees when needed. In addition, it is the subject’s right to request that a statement of dispute be added to his or her file. Once that procedure has been followed, the employer then can take adverse action against the candidate. In other words, the employer is free to not consider this candidate eligible for employment.

    In dispute resolution matters, it does not matter if disputed information is a result of inaccurate court docket information, lack of information provided by the consumer reporting agency or any other scenario; each dispute should be handled with respect, care and compliance.

    Most importantly, always be sure that there is relevancy to all decisions to move forward with adverse action. The adverse information should be viewed and discussed as it relates to the position applied for or currently held. Never discriminate against a subject based on information found in a consumer report and as part of taking adverse action. Always follow the FCRA guidelines and the company’s internal procedures carefully to allow subjects an opportunity to tell their side of the story. Seek legal counsel if you are not sure of the process or if you need further clarification.

    Robert Capwell is the chief knowledge officer ofEmployment Background Investigations Inc., and past chair of the National Association of Professional Background Screeners’ (NAPBS) Board of Directors.

    Editor’s Note: This article should not be construed as legal advice.

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