3 Steps for Denying Employment and Avoiding A Lawsuit

3 Steps for Denying Employment and Avoiding A Lawsuit

Denying employment can be a tricky and risky situation if it is not done right. If you’re already being cautious by running a background check on the applicant you’re on the right track, but to really minimize your risk you must also make sure you are in compliance with the FCRA and EEOC.

This requires staying informed of updates to legislation and creating a hiring process that does not violate employment law. You may think you’re HR is in line with these standards, but even large companies such as Domino’s Pizza, Kmart, Dollar Tree, and Hertz have recently made major mistakes in hiring which has resulted in hefty class action lawsuits.

Here are 3 tips from us to you, to reduce your risk:

1. Be consistent

  • Make sure to review EEOC guidelines for denying employment. One of the leading causes of employment lawsuits involve discrimination based on race, age, or disability.
  • Our suggestion? Create guidelines and hiring policies that you can apply consistently to every applicant. This way there is no confusion as to why the candidate was denied employment.


2. Be transparent before you order a report

  • Prior to the background report, employers must inform candidates that the report will be ordered. You must also provide information about the purpose of the report and the type of information that you will be researching.
  • The process doesn’t end there though. You’ll need to get this is in writing. The applicant can authorize the report on the same form that notifies the candidate of the nature and scope of the investigation.
  • Register for FREE to access an FCRA compliant authorization form and application.


3. Communicate

If you have noticed red flags in the report you order, you cannot deny employment right away. You’ll need to send a pre-adverse letter to the applicant explaining the following:

  • Reason for the potential denial
  • Their right to correct the information
  • The contact information for the company you use to run the report
  • A copy of “A Summary of Your Rights Under the Fair Credit Reporting Act”

Then, you’ll need to give them a reasonable amount of time to correct any information on the report that may be incorrect or misleading. If after this step, you are still planning to deny employment you must send an adverse decision letter that notifies the candidate and lets them know they can correct any information and get a copy of the report for free for 60 days.

Register for FREE to access an FCRA compliant pre-adverse and adverse decision letter template.


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