Counting to Five in the Adverse Action Process

Angela Preston

 

The adverse action process for background checks has been in the spotlight lately, thanks to a growing list of class action lawsuits against employers. In some recent cases, those lawsuits have resulted in multi-million dollar verdicts. Others are still winding their way through the court system, with employers defending their practices and filing motions in an attempt to dismiss some of the more far-reaching claims.

Case in point: Moore v. Rite Aid Headquarters, in the District Court for the Eastern District of Pennsylvania. This case has the full menu of Fair Credit Reporting Act (FCRA) allegations, including a claim that Rite Aid rejected Kyra Moore’s bid for employment without following the proper adverse action process.  Rite Aid filed a motion to dismiss the adverse action claim which the court recently denied.  You can read the court’s opinion here. While this ruling is limited in scope–it allows the Plaintiff to go forward but it’s not a final ruling on the issue–it’s still worth noting as it differs from conventional wisdom. The decision was based in part on Plaintiff’s allegations surrounding the timing of the pre-adverse and adverse action notices, and has set off an alarm for those of us who deal with adverse action on a regular basis.

What is adverse action?

For those readers who are uninitiated in the finer points of the FCRA, it’s the federal law that regulates the background screening process. The background screening bible, if you will. The FCRA requires a two-part notification process when an applicant is disqualified because of something on the background check. The initial, or pre-adverse notice, must be sent prior to making a final hiring decision. This initial notice has to include a copy of the report, thus giving the applicant a chance to dispute the findings of the background check. A second notice must be sent after the final decision not to hire, again spelling out the applicant’ rights under the law.

Moore’s claim: insufficient adverse action notice

The adverse action notices in Moore’s case were sent out by Rite Aid’s background screening provider–a perfectly legit way to handle adverse action. But Moore argues that because of the way the process was initiated and executed, Rite Aid did not allow her sufficient time to respond.

Moore claims that, contrary to the wording of the notice in the initial letter, Rite Aid did not provide her with a full five business days from receipt of the initial notice letter to dispute the report. The court bought this argument, ruling against Rite Aid and causing a jolt for the company and other employers that have a five day adverse action policy.

Why was the court’s decision on the timing of the letters a wake-up call for some of us? The surprising point is the notion that Rite Aid’s policy of sending the second notice five business days after the initial notice is sent might not be sufficient.  The complaint says that the initial Rite Aid notice informed Plaintiff that she had five business days from the receipt of that letter to provide Rite Aid with additional information before Rite Aid would take action. Plaintiff alleges, however, that it was Rite Aid’s policy for its provider to print and mail the final adverse action notice on Rite Aid’s behalf five business days after mailing the initial notice letter.

How the Plaintiff counted to five

Are you still with me?  To break it down, Plaintiff claims that her initial notice letter was mailed on April 25, 2011, and she received it shortly thereafter. The final adverse action letter denying plaintiff employment with Rite Aid was printed and mailed on May 2, 2011. Assuming her dates are correct and looking at the calendar, May 2, 2011 would be five business days after the date the initial notice letter was sent, but at most four business days from plaintiff’s receipt of the initial notice letter. Because it would take at least one day for the initial notice letter to reach an applicant via mail, she claims that she never had the full five business days to respond before the final adverse action notice denying them employment was mailed.

What it all means

The court said, based on Moore’s timeline, she has enough juice to move ahead with this claim. While this ruling is not an actual ruling on the issue, it is enough to make a case for reevaluating the timing of your adverse action notices. Many companies have long relied on the five day rule for adverse action notices. And many companies have a policy that starts the five day clock running from the date the initial letter is sent—not the date the letter is received. In fact, absent a certified mail receipt or some other form of verification, employers would have no way of even knowing when the initial notice letter is received.

The bottom line:

Take a look at your adverse action program. Now is a great time to reevaluate, regardless of how the case is ultimately decided.

  • Consider extending the notice period. Many clients use ten business days in order to give the applicant more time to evaluate and respond.
  • If you want to stick to a five day waiting rule for the second notice letter, and if you start counting on the date the initial notice is mailed, consider building in a few extra days to allow for receipt of the letter by the applicant. While a certified letter might be expensive and cumbersome, for some employers that might also be an option.
  • Look at the wording of your notices. Are you accurately explaining the process? Don’t promise what you can’t deliver. Here, the wording specified that the applicant would have five days from the receipt of the letter, which the court relied on in allowing the case to move forward.
  • If you use a screening partner for adverse action, now is a good to review the process with your provider. Screening companies can send the letters on your behalf, but ultimately you as the employer are on the hook for the contents of the letters and process.
  • Consult with your legal counsel for legal advice on this topic and reach out to background screening experts to ensure that your process is compliant.
Angela Preston
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Angela Preston

Vice President of Compliance & General Counsel at EmployeeScreenIQ
Angela Preston has more than 20 years as a licensed attorney and over 10 years in the background screening area. She serves on the Board of Directors of the National Association of Professional Background Screeners (NAPBS), is a member of the NAPBS Background Screening Credentialing Council (BSCC), and is actively involved in the Society for Human Resource Management (SHRM) and ASIS International. Angela is also a member of the Ohio State and Columbus Bar Associations. Angela has direct oversight and management of compliance programs, and will provide guidance in complex legal matters including state and federal legislation, EEO law, client education, adjudication, pre/adverse action process, NAPBS Accreditation and client and vendor contract management.
Angela Preston
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