Court finds that not hiring someone constitutes an adverse action for purposes of the Fair Credit Reporting Act (FCRA)

In a Court opinion filed December 30, 2009, the U.S. District Court for the Eastern District of Missouri ruled that not getting hired is an ‘adverse action’ as defined by the federal Fair Credit Reporting Act (FCRA), the law that governs background checks. 

In that case, the plaintiff that was representing himself filed legal papers alleging that his report contained inaccurate/erroneous information that the employer and information providers knew would likely have an adverse impact on Plaintiffs ability to secure employment. The Plaintiff further alleged that he was not notified he was not being hired based upon he contents of a consumer report. 

One of the defendants filed a motion to dismiss on the basis that the plaintiff failed to state a claim showing that the plaintiff was entitled to relief under FCRA.

Although the Court did note that the plaintiff’s legal pleading were “not the model of clarity, that it was clear enough that the plaintiff was asking for relief based upon an inaccurate report and not being hired.  The court stated that, the defendant “should be on notice that the “adverse action was that (the defendant) failed to hire Plaintiff. 

The Court declined to dismiss the case or to require the Plaintiff to spell it any more clearly. 

This case underscores the importance of employers following the adverse action rules have when performing background checks.  A consumer is entitled to a pre-adverse notice, including a statement of their rights and a copy of the report, before any adverse decision is made.  If the decision is made final, they are entitled to a second notice.  The purposes of these rules to is to provide a consumer with a meaningful opportunity to be heard in case the consumer believes the background report is incomplete or incorrect. 

Although background firms go to great lengths to provide accurate information, as with anything involving human beings, there is a possibility of an error.  This notice process provides a valuable safety valve so that nothing adverse happens to a consumer before they have the chance to review the report and make any objections known. Where a consumer is the victim of identity theft, an employment screening report may be the first time they even know identity theft had occurred. 

For a detailed guide on how the adverse action process works including sample letters, see the Employment Screening Resources Special Report, The FCRA in Four Easy Steps for Employers at:

(Note: Employment Screening Resources  has adopted a practice of not indentifying the names of parties to lawsuits unnecessarily in blogs and newsletters, since it does not add anything to the lessons learned, and there can be more to the story.  However, if a reader has a reason to review the actual case and cannot locate it themselves, please contact Jared Callahan at or by phone at 415-898-0044.)