When a background check turns up something that makes you reconsider hiring a candidate, you can’t just ghost them and move on. There’s a process you’re legally required to follow.
That process is called adverse action.
This guide breaks down what adverse action is, why it exists, and how to manage it easily—without surprise fees.
What is an adverse action?
An adverse action is when an employer makes a decision that negatively affects a candidate or employee based on a background check. This usually means one of two things:
- Choosing not to hire a candidate
- Terminating the employment of a current employee
In some cases, it could also mean demotions, rescinded offers, or limiting job opportunities. For the sake of this post, we’re going to focus on the most common application, choosing not to hire a candidate.
When people talk about “adverse action,” they’re referring to the formal, legally mandated process that follows a background check decision. Employers must notify the candidate, give them a chance to respond, and then make a final determination.
We’ll break down each step in detail later. For now, just know that adverse action isn’t a single decision—it’s a structured process with specific legal requirements.
Why does adverse action exist?
The adverse action process exists because it is required by the Fair Credit Reporting Act (FCRA), which ensures that candidates have a fair chance to address information in their background checks before it impacts their employment.
The law is designed to:
- Give candidates the opportunity to respond. Some records require context. A candidate may have faced circumstances that make the information less relevant. The process ensures they can share that context before losing a job opportunity.
- Give candidates time to dispute inaccurate results. In the rare circumstance of a background check containing errors, the adverse action process gives candidates time to correct mistakes before a final decision is made.
Adverse action is not about second-guessing an employer’s judgment—it’s about making sure employment decisions are based on complete information. And it protects consumers from being negatively affected by incorrect or irrelevant information on their consumer report.
What is the adverse action process?
The adverse action process is designed to give candidates the time and information they need to respond before a final decision is made. While some details may vary, the steps are generally the same.
1. Pre-adverse action notice
The employer provides the candidate with a notice stating that information in their background check may impact their employment. This includes:
- Access to a copy of the background check report
- Most providers also list the particular records that led the employer to initiate the Adverse Action process.
- A summary of their rights under the FCRA
- Instructions on how to dispute the report with the Consumer Reporting Agency if they believe it contains errors
This notice must be sent before making a final decision. It can be delivered electronically or by mail.
2. Waiting period
Employers must wait a reasonable amount of time before taking final action. The standard waiting period is seven calendar days.
- During this time, the candidate can dispute the findings or provide additional context
- Employers are required to keep the position open until the process is complete
3. Review of new information
The employer must review any new information gained during the waiting period before making a final decision. This involves:
- Considering any changes to the report or relevant context provided by the candidate
- Deciding whether to move forward with the hiring decision
4. Final adverse action notice
If the employer decides to proceed with the adverse action, they must send a final notice that includes:
- Confirmation that the decision has been made
- Details on how to obtain another copy of their background check
5. Secure disposal of information
Employers must properly dispose of background check reports and related records once they are no longer needed. This means:
- Shredding physical copies
- Permanently deleting digital files
Each step in this process ensures compliance with the FCRA and protects both the employer and the candidate from unfair or inaccurate employment decisions.
Who is responsible for the adverse action process?
Adverse action is the employer’s responsibility—not the background check provider’s responsibility. While great providers can make the process much easier, they don’t make hiring decisions. The employer is responsible for following the required steps, ensuring notices are sent properly, and keeping records of the process.
That means:
- The employer decides whether to take adverse action. A background check provider delivers a report, but the employer determines if the results require action.
- The employer is responsible for sending the required notices. The pre-adverse action and final adverse action notices come from the employer.
- The employer ensures compliance. Even if a provider offers automation or tools to help, it’s on the employer to make sure every step is followed correctly.
Although the responsibility lies with the employer, many background check providers offer tools that facilitate the entire process, making compliance easier. In these cases, employers only need to make decisions—the provider’s system takes care of the rest.
Some providers support the process better than others.
- Some verify candidate email addresses upfront, allowing for faster and cheaper electronic notices instead of slow, expensive mail.
- Some offer automated workflows that manage the details of the process, so employers don’t have to stress over tracking timelines or manually sending notices.
- Some include these tools at no cost to you.
Employers are always responsible for adverse action, but the right provider can make compliance much easier.
How much do adverse actions cost?
Not every background check provider includes adverse action support in their pricing. Some charge extra fees—often hidden until you’re already locked in.
Here’s what to watch for:
- Per-screen fees. Some providers charge up to $5 per background check just to facilitate adverse action notices.
- Excessive mailing fees. If a provider has outdated technology, they may charge extra for mailing physical notices instead of sending them electronically where physical notices aren’t required in a jurisdiction.
- Additional service fees. Some providers bundle adverse action into “premium” compliance packages, meaning you pay more for something that should be standard.
At Yardstik, adverse action is included at no extra cost. No surprise fees, no nickel-and-diming.
How to easily manage adverse actions
Staying compliant with adverse action rules might seem daunting at first. Who wants to keep track of all of those regulations?
But it doesn’t have to be complicated. The key is choosing a background check provider that makes the process simple, fast, and cost-effective.
Here’s what to look for:
- No extra fees. Some providers charge for adverse action support, while others—like Yardstik—include it at no cost.
- Automated workflows. A provider that generates and sends adverse action notices for you (after you’ve made the decision) removes manual work and helps you reduce risk.
- Reliable electronic delivery. Look for a provider that verifies candidate email addresses upfront, so notices can be sent digitally where permitted instead of relying on slow, expensive mail.
Yardstik makes adverse action simple, automated, and free. No surprise fees, no unnecessary steps—just a fast, compliant process that works. It’s true, we don’t kid around when it comes to cost. Talk to us today.
Disclaimer: This content is for informational and educational purposes only and should not be taken as legal advice or used as a substitute for obtaining legal counsel. You should always speak to your own lawyer before acting or refraining from acting on the basis of any information included in this post.