What does adverse action mean? Is a consumer report the same as a background check? And what’s a candidate dispute?
If you’re not familiar with background check terminology, it can sound like a completely different language. While there’s no fun app you can download to learn it, employers and hiring managers should take the time to familiarize themselves with some key background check terms. Knowing this terminology can help keep your business compliant with regulations and prevent costly mistakes.
Working with a partner fluent in background check terminology, such as InCheck, can help guide you through the process to make sure nothing gets lost in translation. We’ll work with you to build a simplified background screening package that makes sense and meets your needs.
Let’s break down some background check definitions you should know when making hiring decisions.
1. Consumer Report
Broadly speaking, a consumer report is a record of information about an individual. It’s used to determine a person’s suitability for decisions around lending, insurance, housing, or employment.
An employment background check is a consumer report. Consumer reporting agencies (CRAs), such as InCheck and other background check companies, compile these consumer reports for employers to make hiring decisions. A consumer report for employment may include:
- Criminal history
- Employment records
- Education verification
- Driving records
- Credit check
When employers use consumer reports to make hiring decisions, they must comply with the federal Fair Credit Reporting Act (FCRA). The FCRA, enforced by the Federal Trade Commission, requires employers to take these steps when using consumer reports:
- Get written permission from a candidate or employee before doing a background check.
- Notify the individual that the information may be used to make employment decisions.
- Dispose of the consumer report properly after using it.
If employers decide not to hire a candidate based on information in a consumer report, they must also follow strict guidelines for notifying the candidate and giving them time to review the report.
2. Pre-employment Screening
Pre-employment screening is the process of verifying a candidate’s background before hiring them. A pre-employment background check can vary based on the role or industry, but it often includes:
- Criminal history: This can include criminal records from federal and state databases and county courthouses, as well as sex offender registries and civil court cases.
- Employment and education verification: These verifications typically involve contacting past employers, colleges, and/or high schools to validate a candidate’s education and employment history.
- Drug screening: Pre-employment drug testing requirements can vary based on the employer or industry. Some positions, such as trucking roles in the Department of Transportation, mandate specific drug screenings.
- Motor vehicle records: Motor vehicle record (MVR) checks assess a candidate’s driving history, including accidents, violations, and convictions, such as DUI. It’s common for roles that require driving — regardless of whether they are driving a company vehicle.
- Occupational health screening: This screening checks for potential health risks. It may include physicals, vaccinations, or testing, such as hepatitis tests.
- Professional license verification: For jobs that require licensure, this verification is a standard part of pre-employment screening. It checks a candidate’s professional qualifications. In many cases, licenses are also monitored post-employment.
- Reference checks: Pre-employment screening can also include reference checks, which involve contacting a candidate’s references to learn more about their experience.
3. Adverse Action
The definition of adverse action is any negative decision taken against a candidate or employee based on a background check report. Adverse action can include:
- Declining to hire a candidate
- Withdrawing a conditional offer
- Suspending or terminating an existing employee
- Refusing a promotion to an employee
The FCRA regulates how employers must handle adverse action if they use a CRA, such as a background check company, to do background checks on candidates or employees.
Under the FCRA, if you decide to take adverse action, you must:
- Provide a pre-adverse action notice: This notice must include a copy of the background check and a summary of the candidate’s rights under the FCRA.
- Allow for a waiting period: You need to give the person time to respond to the notice. A typical waiting period is five to seven business days.
- Send a final adverse action notice: The final notice must state the adverse action you’re taking and notify the candidate of their right to dispute the report.
It’s essential that you comply with the FCRA background check requirements for adverse action. Noncompliance can result in legal penalties and reputational damage to your business.
4. Turnaround Time
Background check turnaround time refers to how long it takes to complete a background check. Turnaround time can vary widely because it depends on various factors, which can include:
- Type of screening: Some screenings may have complex requirements or involve reaching out to multiple sources, which can take longer.
- Jurisdictional requirements: Different jurisdictions can be slower to respond. For example, some courthouses are unable to expedite requests.
- Candidates’ information: If a candidate is slow to provide information for a background check, it can lengthen the turnaround time.
While most hiring managers want fast turnaround times, the key is balancing speed and accuracy. A rushed background check process can miss important details that may be damaging down the road. At the same time, delays can slow down the hiring process and frustrate applicants, leading to a decline in the candidate experience.
5. Dispute
A background check dispute occurs when a candidate challenges the accuracy of a consumer report. A candidate may dispute a background check report for several reasons, including incorrect data or outdated records.
Regardless of the reason, all candidates have the right to dispute findings in background check reports. Under the FCRA, candidates must have the opportunity to:
- Review their background check report
- Dispute false, incorrect, or outdated information
- Receive another copy of their report
For employers and hiring managers, it’s imperative to understand candidates’ rights in the background screening process. If a candidate files a dispute, you should pause the hiring process and wait for the CRA to investigate the dispute. Don’t make an employment decision until the process is complete.
Become Fluent in Background Check Terminology with InCheck
There are many terms used to define the background check process. But understanding this terminology isn’t just about learning industry jargon — it’s about protecting your company and building a compliant screening process. Knowing what a consumer report includes, how to handle adverse action, and what rights candidates have allows you to make fair, transparent hiring decisions.
At InCheck, we simplify the screening process with expert guidance and responsive customer service. We offer customizable pre-employment screening packages and fast, reliable turnaround times for both small to medium-sized businesses and enterprise organizations alike.
With InCheck in your corner, you don’t need to go down a Google rabbit hole when you have a question about background check terminology. You can pick up the phone and speak with a trusted, knowledgeable expert who can help define background check terms and answer your questions.
If you’re ready to work with a partner who’s fluent in background check terminology, contact InCheck today.