Adverse action in 2025, a renewed look at employer liability, litigation trends, and lessons from recent cases

Introduction‍

For more than two decades, adverse action litigation has been one of the most persistent and costly compliance challenges for employers who use background investigations. The procedural requirements have not changed substantially, yet lawsuits continue to proliferate. In 2025, adverse action claims, including numerous class actions, increased significantly as employers struggled with timing errors, automation failures, insufficient notices, and misunderstanding of their obligations under the Fair Credit Reporting Act.

In the early years of modern background screening, many employers assumed that procedural mistakes were low-risk administrative errors. The last twenty years have shown the opposite to be true. Courts continue to enforce strict adherence to each step of the adverse action process, and employers who fall short face millions of dollars in statutory damages, punitive damages, attorney fees, defense costs, and reputational harm.

Thuro published one of the earliest comprehensive employer guides on adverse action more than twenty years ago. Since then, we have worked closely with our clients to build compliant policies, implement defensible workflows, and train their HR and talent acquisition teams. Our clients have avoided the costly missteps that lead to litigation. However, many employers outside our client base continue to repeat the same errors, placing themselves squarely in the path of risk.

This updated white paper revisits adverse action requirements, explains why litigation continues to increase, and surveys several important 2025 decisions that illustrate how courts are evaluating employer conduct today.

I. Why Adverse Action Litigation Continues To Rise

Adverse action remains one of the most frequently litigated areas of the FCRA for several reasons:

1. Employers underestimate the complexity of the process

‍Adverse action is not a single step but a multi-stage legal procedure. Missing or compressing steps, even unintentionally, exposes employers to significant liability.

2. Automation and artificial decision tools create compliance gaps

Many adverse action lawsuits arise when automated systems mark candidates as “ineligible” or “fail” before the legally required notices are sent and before any human review occurs.

3. Timing errors are extremely common‍

Courts repeatedly find that employers do not allow a meaningful waiting period between pre-adverse and adverse notices, or they initiate adverse action before the dispute or reinvestigation process is complete.

4. Employers assume vendors bear responsibility

Vendors may assist with administrative steps, but the legal obligation rests solely with the employer. Courts continue to reinforce that employers cannot outsource liability.

5. High-volume hiring leads to systemic errors

Retail, healthcare, call centers, hospitality, financial services, and staffing remain among the highest risk sectors. One flawed workflow can affect thousands of candidates in the same manner, making class certification easier.

II. What 2025 Litigation Teaches Employers

Several themes emerged from 2025 cases:

1. Courts expect strict compliance

Courts showed little tolerance for procedural shortcuts. Even minor deviations were enough to allow cases to proceed, driving up defense costs.

2. Automated disqualifications are treated as adverse action

When a system classifies a candidate as “ineligible,” courts view that as a decision requiring pre-adverse action procedures—even if the employer has not yet communicated the decision.

Consider the case Huong Thu Nguyen-Wilhite v. Tapestry, Inc. (February 2025). In this classaction, the plaintiff alleged that Tapestry relied on its vendor’s automated adjudication results to determine eligibility without providing the required pre-adverse action notices. Although the court ultimately denied class certification, the decision included detailed findings about Tapestry’s workflows, including automated classification of applicants as “ineligible” without a human review before adverse action. The case demonstrates the legal scrutiny aimed at automated systems.

Relevance for employers:
‍Even though class certification was denied, the case serves as a warning that automated adjudication can unintentionally bypass FCRA notice obligations. Employers must ensure that decisions, flags, and eligibility determinations do not function as adverse action before the pre-adverse process is completed.

3. Fingerprint and government-sourced records still require adverse action notices

Many employers still misunderstand this. If a report is used for employment purposes, the FCRA applies.

The recent case of Debeikes v. Frost Bank, decided 9/23/2025, involved a conditional job offer rescinded solely due to the contents of an FBI fingerprint-based criminal history report. The employer did not provide a copy of the report, pre-adverse action notice, summary of rights, or a meaningful opportunity to dispute inaccuracies. The plaintiff later proved the report was inaccurate and succeeded in having the underlying record corrected. The court denied the employer’s motion to dismiss, allowing the adverse action claim to move forward.

Relevance for employers:
Even when using fingerprint-based reports, which many employers mistakenly view as outside the FCRA framework, full adverse action obligations apply when the report is obtained for employment purposes. This decision reinforces that employers cannot rely solely on the perceived reliability of government-sourced data. Errors occur in every data system, and the FCRA dispute process exists for this very reason.

4. Mixed-source decision-making does not lessen employer obligations

Even when employers supplement consumer reports with online research, internal information, or interviews, the FCRA still applies if any portion of the decision relied on information in a consumer report.

In April 2025, the court in Croley v. Jewish Residential Services, Inc. found the employer rescinded a conditional offer based partly on a background investigation and partly on online research into news articles involving the applicant. The employer argued that standing was lacking under the FCRA, but the court disagreed and allowed the adverse action claim to proceed. The court emphasized that when an employer relies on any information in a consumer report to make a hiring decision, the full adverse action requirements apply, regardless of whether the employer supplements the report with other publicly available information.

Relevance for employers:
‍This case highlights that mixing report data with internet research does not diminish FCRA obligations. It also confirms courts’ willingness to allow claims to proceed to discovery, increasing defense costs. The case reinforces the need for strict compliance, even when report findings appear minor or when an employer believes outside information played a larger role.

5. Courts continue to allow claims to advance past early dismissal

This trend reflects a willingness to let discovery proceed, dramatically increasing the cost of litigation, even before any determination on liability.

Consider McKeown v. Paycom Payroll LLC from March 2025 which involved multiple claims but included an adverse action allegation. The applicant argued that Paycom rescinded her job offer based on a background and credit report pulled without proper authorization and without providing the required copies and notices. The court allowed portions of the FCRA claim to proceed, while dismissing unrelated discrimination claims.

Relevance for employers:
This case reinforces that employers must strictly comply with both disclosure and adverse action requirements. Failure to provide authorization is a separate FCRA violation and combining that with adverse action errors multiplies exposure. The case also highlights the litigation risk for employers who rely on large internal hiring teams where consistency can deteriorate without robust training.

These themes demonstrate that adverse action errors continue to be low-hanging fruit for plaintiffs’ attorneys and a preventable source of exposure for employers.

III. Why Employers Continue To Make the Same Mistakes

Despite decades of guidance, several recurring issues explain why adverse action litigation remains active:‍

• ‍Inconsistent internal training across HR, talent acquisition, and decentralized hiring teams
• ‍Overreliance on vendor systems that employers misunderstand or fail to audit‍
• Lack of clarity about what constitutes a “consumer report”‍
• Confusion about timing requirements and the meaning of a “reasonable period”‍
• Failure to document the adverse action workflow‍
• Rapid-hire environments where compliance is sacrificed in favor of speed

These gaps reaffirm the need for structured training and improved governance across all hiring functions.

IV. A Modern Approach to Adverse Action Compliance

The traditional approach—manual emails, loose sequencing, and limited oversight—was never designed to withstand today’s legal landscape. Employers must now implement:

• ‍Clearly defined workflows that cannot skip steps‍
• Documentation and auditing to demonstrate compliance‍
• Human review of any automated scoring or disqualification‍
• Consistent timing windows that allow meaningful applicant participation‍
• Policy alignment across states and local jurisdictions
• Training for every individual involved in hiring decisions

With these elements in place, employers can drastically reduce the risk of FCRA exposure.

Conclusion

More than thirty years after the publication of our first comprehensive employer guide on adverse action, the same mistakes continue to generate costly class actions. The old approach to background screening and adverse action was not built for modern hiring complexities or for the automated systems that dominate today’s talent processes.

Employers face a critical choice. They can continue relying on outdated, fragmented, and vulnerable practices, or they can embrace a structured, modern, and defensible adverse action process. The past year has demonstrated that the cost of noncompliance remains extraordinarily high. The cost of doing it correctly is significantly lower.

Thuro has spent more than seven decades conducting investigative background work and more than twenty years training employers on adverse action compliance. The lessons from 2025 reaffirm the importance of discipline, structure, and expert guidance in maintaining a legally compliant screening program.

About the Author

Kevin Prendergast is the President of Thuro, one of the nation’s longest-standing investigative background screening firms with more than seventy years of continuous operation. Kevin has more than thirty years of experience as an attorney in investigative screening, employer compliance, due diligence, and risk advisory services. He is widely recognized as one of the foremost authorities on Fair Credit Reporting Act compliance, adverse action procedures, and legally defensible hiring practices.

Kevin has authored numerous industry white papers, legal analyses, compliance guides, and training programs used by employers across the United States. He has trained thousands of HR and talent professionals on adverse action, background investigations, Ban-the-Box compliance, and risk-based hiring strategies. Kevin continues to provide guidance for many of the largest professional services firms, regulated industries, and global employers on building screening programs that are accurate, compliant, and defensible.

Legal Disclaimer

This white paper is provided for informational purposes only and does not constitute legal advice. Employers should consult qualified legal counsel regarding specific compliance obligations under the Fair Credit Reporting Act and applicable state or local laws. While every effort has been made to ensure accuracy, Thuro makes no representations or warranties regarding completeness or applicability to any particular situation. Reading this material does not create an attorney-client relationship with Thuro or any of its representatives.