New Colorado Background Screening Law Coming July 1, 2013

According to data from 2012, 53 percent of employers did not use credit information on job candidates when making a hiring decision. Meanwhile, 80 percent of those that did use credit reports noted that they hired a candidate even when the credit report contained negative information.

Ultimately, it seems fewer and fewer employers are utilizing credit checks when screening candidates for employment – good news for Colorado employers.

As of July 1, 2013, Colorado will join the ranks of states that now prohibit employers from using credit information as part of the pre-employment background screening process. Eight other states, including California, Connecticut, Hawaii, and Oregon, ban employers from using consumer credit information when making employment decisions.

The new Colorado law prohibits employers with four or more employees from using written or oral information about a consumer’s credit worthiness, standing, capacity, or score when evaluating them for any employment action, including “hiring, promotion, demotion, reassignment, adjustment in compensation level, or retention.”

Two types of employers are exempt: banks or financial institutions and employers required by law to obtain consumer credit information. The majority of employers may not use information unless it is “substantially related to the employee’s current or potential job.”

The law defines “substantially related” as either:

• An executive or management position which:
  • Directs or controls a business, division, unit, or agency;  and/or
  • Owes a fiduciary responsibility to the employer; and/or
  • Has access to financial information; and/or
  • Has authority to make payments, collect debts, or enter contracts.
• A position involved with Federal defense, intelligence, national security, or space agency contracts.

Additionally, the employer must have a bona fide purpose for using the information and must advise the applicant.

Experts recommend that Colorado employers who use credit reports:

• Stay current on the law and their own background screening policies
• Re-evaluate their hiring practices and procedures
• Ensure background screening documents, such as disclosure and authorization forms, are appropriate

To ensure further compliance with the new Colorado background screening law, choose an expert in the field. TruDiligence is a full-service background check and investigative firm specializing in FCRA compliant employment screening. We take the guesswork out of the pre-screening process. For more information, browse our website, review our blog, or contact us.