backgroundchecks.com Legislation and Compliance Update - Colorado Bans the Use of Consumer Credit Information for Employment Purposes

Colorado passed new legislation on April 19, 2013 which restricts an employer’s use of consumer credit information for employment purposes. The legislation is cited as the “Employment Opportunity Act.” The act takes effect on July 1, 2013.

Colorado’s new legislation prohibits an employer from using consumer credit information for employment purposes unless the information is substantially related to the employee’s current or potential job.  “Employment purposes” is defined in the Act as “evaluating a person for employment, hiring, promotion, demotion, reassignment, adjustment in compensation level, or retention as an employee.”

Additionally, an employer may not require an employee to consent to a request for a credit report that contains information about the employee’s credit score, credit account balances, payment history, savings or checking account balances, or savings or checking account numbers as a condition of employment. Consumer credit information includes a credit score but does not include the address, name, or date of birth of an employee associated with a social security number.

Exceptions to these restrictions include:

a.     The employer is a bank or financial institution;

b.     The report is required by law;

c.     (1) The report is substantially related to the employee’s current or potential job and (2) the employer has a bona fide purpose for requesting or using information in the credit report that (i) is substantially related to the employee’s current or potential job and (ii) is disclosed in writing to the employee.

A consumer credit report is considered “substantially related to the employee’s current or potential job” if the information is related to the position because:

(a) the position is either

(1) an executive or management position or
(2) professional staff to executive or management personnel and

(b) the position involves one or more of the following:

(1) Setting the direction or control of a business, division, unit, or an agency of a business,
(2) A fiduciary responsibility to the employer,
(3) Access to customers’, employees, or the employer’s personal or financial information other than information customarily provided in a retail transaction, or
(4) The authority to issue payments, collect debts, or enter into contracts.

A consumer credit report is also considered “substantially related to the employee’s current or potential job” if the information is related to the position because the position involves contracts with defense, intelligence, national security, or space agencies of the federal government.

If an employer relies on consumer credit information when taking an adverse employment action, it must disclose that and disclose the particular information it relied upon. The disclosure must be made to an employee in writing or to an applicant in the same medium as the application (e.g., electronically for an electronic application).

Civil penalties may be awarded up to $2,500 for injuries as a result of a violation of the Act.

The Act may be accessed here: http://www.leg.state.co.us/clics/clics2013a/csl.nsf/fsbillcont3/
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