Colorado Employers are Now Limited in Using Consumer Credit Information for Employment Purposes

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State of ColoradoA new law was passed in Colorado entitled the “Employment Opportunity Act”, Colo. Rev. St 8-2-126, which will drastically limit consumer credit information from being used for employment purposes. The law, which was signed on April 19, 2013, and which will go in effect on July 01, 2013, will be the ninth state law to significantly limit how employers may use consumer credit information to make employment decisions.

The law defines “employment purposes” to encompass evaluation of a person for “employment, hiring, promotion, demotion, reassignment, adjustment in compensation level, or retention.” Effective July 01, 2013, Colorado employers may only use consumer credit information for employment purposes if:

  • “The employer is a bank or financial institution;
  • The report is required by law; or
  • The report is substantially related to the employee’s current or potential job and the employer has a bona fide purpose for requesting or using information in the credit report that is substantially related to the employee’s current or potential job and is disclosed in writing to the employee.”

According to the new law, if an employer takes adverse action against an employee in part or in whole because of employee credit information, the employer must disclose, in writing or in the same medium in which the application was made, the reason for the adverse action, as well as the particular information the employer used in making the adverse decision against the employee. Adverse action, as defined by this law, may include “demotion, reassignment to a lower-ranked position or to a position with a lower level of compensation, decrease in compensation level, denial of promotion, termination of employment, or any other decision for employment purposes that adversely affects an employee or applicant.”

Individuals who feel they are injured by violations of this law may file complaints with the Colorado Division of Labor. Investigation outcomes will be issued within 30 days of the complaint, and there is a maximum of $2,500 in civil penalties that can be awarded to complainants for injuries deemed to be caused from violations under this law.

Colorado employers may wish to re-evaluate all of their uses of consumer credit information in relation to employment purposes, in order to help ensure compliance with this law by July 01, 2013.   Additionally, eight other states have also enacted laws for responsible credit report use for employment purposes.  As of the publication date of this article, California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont, and Washington either prohibit or restrict employers from using such information at a certain time within the hiring process or restrict the use of credit reports based on position or industry.  Employers should refer to their corporate legal counsel and active legislation within their state for proper use. 

All information contained herein is provided by Employment Background Investigations solely for the convenience of its readers. EBI is not providing legal advice or counsel and nothing provided within should be deemed as legal guidance or advice.  Readers should consult with their own legal counsel to determine their legal responsibilities or if they have questions on any information provided by EBI.

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