Fri, May 3rd, 2013 - 11:02 am - By Gordon Basichis
As some believe that conducting employment credit reports as a background check for employment screening may be discriminatory, affecting minorities, mainly, and those who suffered in the economic downturn, Colorado has become the ninth state to prohibit credit reports for employment purposes.
According to the notice distributed by the law firm Seyfarth and Shaw….”
Two types of employers are generally exempt from the law’s prohibitions: (1) banks or financial institutions; and (2) employers who are required by law to procure consumer credit information. These two classes of employers are permitted to obtain and use credit information for all their employees, regardless of specific positions or responsibilities and need only abide by the law’s additional adverse action requirements (detailed below).
The vast majority of employers, however, are prohibited from requesting or using an applicant or employees’ consumer credit information unless that information is “substantially related to the employee’s current or potential job.” The statute defines the substantially related language to mean one of two types of positions:
1. A position that constitutes executive or management personnel (or officers or employees who constitute professional staff to executive and management personnel) and which involves one or more of the following:
- sets the direction or control of a business, division, unit or an agency of the business;
- owes a fiduciary responsibility to the employer;
- has access to customers’, employees’ or the employer’s financial information; or
- has the authority to make payments, collect debts or enter into contracts.
2. A position that involves contracts with defense, intelligence, national security, or space agencies of the federal
Even for these positions where credit information is “substantially related to the employee’s current or potential job”, an employer must satisfy two additional requirements before it uses and applicant or employee’s consumer credit information in making an employment decision. First, the employer must have a “bona fide purpose” for requesting or using the information in the credit report. Second, the employer must disclose its bona fide purpose to the applicant employee. Notably, the law is silent as to when this disclosure must be made and does not define the term “bona fide purpose.”
Also, when consumer credit information is “substantially related to the employee’s current or potential job” an employer may, but is not required to, afford the applicant or employee an opportunity to explain any unusual or mitigating circumstances (e.g. error, lay off, identity theft, medical expenses etc. ).”