What Is a Pre-Adverse Action Letter? (Plus What To Include)

Updated June 24, 2022

Pre-employment background checks have become a standard part of the candidate screening process. Managers and HR professionals alike use the information gained through background checks to inform their decisions regarding a candidate's status and their potential employment. When the information revealed by a background check results in a decision regarding a candidate's status, HR team members typically must take adverse action, provide notice to the candidate and report their decision properly to regulatory bodies. In this article, we outline what adverse action is, what a pre-adverse action letter is and what to include in a pre-adverse action notice.

What is adverse action?

Adverse actions are measures taken by employers and human resources (HR) professionals that somehow impact a candidate's employment status with a specific organization. Typically, HR team members take adverse actions because of information gained through a pre-employment background check. Adverse action often occurs through measures like declining a candidate's application, demoting or dismissing a current employee, denying a promotion or transfer and offering employment in a less senior position—meaning a candidate may still receive an employment offer depending on their particular situation.

When performing such measures, organizations usually must present the information that informed this decision to the candidate as a result of employment regulations. To do this, HR professionals typically follow the procedure to draft a document called an adverse action notice, which updates a candidate on the status of their employment due to the results of their background check. This allows candidates to understand the action and raise any concerns they have about the report. Candidates may dispute the information from their background check report—and follow up on an adverse action decision—if it contains errors due to the following:

Identity theft: If a candidate has been a victim of identity theft, their report may contain erroneous information that doesn't accurately reflect their background.
Outdated information: Credit reporting agencies sometimes report outdated information during background checks, meaning a candidate's report may contain inconsistencies.
Typographical errors: Transcription and typing errors may result in a candidate's report including inaccurate information.
Common name: If a candidate has a common name, their report may contain information regarding another individual that doesn't apply to them due to confusion.

What is a pre-adverse action letter?

A pre-adverse action letter or notice is a written document that informs a candidate that an organization discovered questionable information as a result of their background check. With this, a pre-adverse action notice also typically details that an organization doesn't intend to move forward with their candidacy or intends to move forward in a different capacity. These letters may be delivered electronically or in hard copy, depending on an organization's communication preferences.

A pre-adverse action notice is an initial step that HR professionals typically perform when taking adverse action and is an essential part of the full process of doing so. Here's an outline of the full adverse action process to help you gain a better understanding of the purpose of a pre-adverse action notice:

1. Pre-adverse action notice

After running a background check, if HR professionals find any information they deem as grounds for declining a candidate, dismissing or demoting a current employee or offering a less senior position, they must notify the individual. To do this, HR professionals need to draft a pre-adverse action letter and send it to the candidate or employee. In addition to this, organizations usually must send a copy of the background check and a summary of the individual's rights regarding the notice. It's typically a good practice for organizations to keep a copy of the letter and document its delivery as a record.

2. Review and waiting period

After the candidate or employee has received the pre-adverse action notice, the organization typically provides a reasonable period of time—often approximately five days—for the individual to review the notice, background check report and their rights regarding the notice. This waiting period allows the individual to follow up on the report and address any information they understand as inaccurate. From here, the organization typically must provide an opportunity for the individual to offer additional information that corrects the report or justifies its findings.

3. Adverse action notice

After the waiting period has expired, HR professionals can review the candidate's or employee's response to the pre-adverse action notice and consider any additional information they provided to clarify the report. If the second review of the report doesn't affect the organization's original decision regarding the candidate or employee, they can move forward with a final adverse action notice that informs the candidate of the reaffirmation of their decision. In addition, organizations typically notify individuals of their right to dispute the decision within an adverse action notice.

4. Disposal of sensitive documents

Once an organization issues an adverse action notice, regulatory bodies typically require them to dispose of sensitive documents acquired through a background check. HR professionals must do this through secure methods to ensure that no unauthorized individuals have access to a candidate's or employee's private information. For example, they may shred or incinerate paper copies, while they may erase digital copies.

What to include in a pre-adverse action notice

When drafting a pre-adverse action notice as an HR professional, it's important to do research into exact requirements for doing so as established by local and federal regulatory bodies. Knowing what these bodies require can help you ensure your organization's compliance with employment regulations. With this in mind, there are a few essential elements that typically appear as part of a pre-adverse action notice, including the following:

Notice of employment status: The primary purpose of a pre-adverse action notice is to inform a candidate or employee about an organization's decision regarding their employment status and how it relates to the background report. Therefore, this notice typically details whether an organization desires to move forward with an individual's employment and in what capacity.
Information from background report: To justify their reasoning behind their decision, an organization must provide information from the background report within a pre-adverse action notice. Often, a candidate receives a full copy of their report so that they can review it in detail.
Summary of rights: Alongside the notice and report, organizations need to include a summary of the candidate's or employee's rights under the Fair Credit Reporting Act (FCRA), a federal regulatory body that governs the issuance of adverse action notices.

Can you still hire someone after issuing a pre-adverse action letter?

Organizations may still hire candidates who receive pre-adverse action letters, depending on the specific situation. HR professionals issue pre-adverse action letters to address a variety of actions, including declining a candidate, dismissing or demoting a current employee or offering a candidate a less senior position. Therefore, the final result of an adverse action may still include hiring a candidate to perform a different role than they originally applied for.

In addition, pre-adverse action letters are only the initial step in the adverse action process. If a candidate or current employee uses the review and waiting period after receiving their notice to contest the results of their background report successfully, their efforts may nullify the adverse action. In such a situation, a candidate remains eligible for consideration and may receive an offer depending on an organization's preferences.