Legal Updates

This page is to inform our clients of changes in the laws and regulations regarding employment screening.



Colorado Bans Use of Credit Reports for Employment Purposes

Effective July 1, 2013, Colorado becomes the ninth state to restrict an employer’s right to obtain and use credit information for making employment decisions. Colorado joins California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont and Washington.

Senate Bill 13-018signed into law by Governor Hickenlooper on April 19 – creates the “Employment Opportunity Act”, which specifies the purposes for which consumer credit information (i.e., consumer credit reports and credit scores) can be used by an employer or potential employer (jointly referred to as “employer” and excludes any state or local law enforcement agency).

More specifically, the bill:

  • Prohibits an employer’s use of consumer credit information for “employment purposes” unless the information is “substantially related to the employee’s current or potential job”;
  • Requires an employer to disclose to an employee or applicant for employment when the employer uses the employee’s consumer credit information to take adverse action against him or her and the particular credit information upon which the employer relied;
  • Authorizes an employee aggrieved by a violation of the above provisions to bring suit for an injunction, damages, or both; and
  • Requires the department of labor and employment to enforce the laws related to employer use of consumer credit information.

The bill defines each of the following terms:

  • Employee means every person who may be “permitted, required, or directed by any employer in consideration of direct or indirect gain or profit, to engage in any employment and includes an applicant for employment.”
  • Employment purposes refers to the evaluation of a person for “employment, hiring, promotion, demotion, reassignment, adjustment in compensation level, or retention as an employee.”
  • Substantially related to the employee’s current or potential job means the information in the credit report is related to the position for which the subject is being evaluated, because the position is one for executive or management level personnel or officers, or employees who constitute professional staff to executive and management personnel, and the position involves one or more of the following:
    • Setting the direction or control of a business, division, unit, or an agency of the business;
    • A fiduciary responsibility to the employer;
    • Access to customers, employees, or the employer’s personal or financial information, other than information customarily provided in a retail transaction;
    • The authority to issue payments, collect debts, or enter into contracts; or
    • Involves contracts with defense, intelligence, national security, or space agencies of the federal government.

The Colorado Division of Labor will be in charge of enforcing the act. Someone claiming injury because of a violation of the act is entitled to an administrative hearing and, if the prevailing party, recovery of a civil penalty not to exceed $2,500.

Currently, Georgia, Indiana, Florida and Kentucky are considering similar bills that would limit credit reports for employment purposes

Urgent NoticeConnecticut Law: Employers restricted use on Credit Reports effective October 1, 2011.

Effective October 1, 2011, a new law in Connecticut – Senate Bill No. 361 (S.B. 361) – signed by Governor Dannel Malloy will prohibit certain employers from using credit reports in making hiring and employment decisions regarding existing employees or job applicants. The law applies to all employers in Connecticut with at least one employee. Connecticut is one of six U.S. states – joining Hawaii, Illinois, Maryland, Oregon, and Washington – that currently prohibit the use of credit history in employment decisions.

Alert California signs into law restricting Credit Reports for Employers.

The final version of California Assembly Bill No. 22 (AB 22) that limits credit checks of job applicants by most employers was signed into law by Governor Jerry Brown on October 8, 2011. Effective January 1, 2012, the bill will prohibit most employers or prospective employers, with the exception of certain financial institutions, from obtaining consumer credit reports for employment purposes. California now joins Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington as the U.S. states that currently restrict the use of credit checks by most employers for employment decisions.

Chapter 3.6. Employer Use of Consumer Credit Reports California
1024.5. (a) An employer or prospective employer shall not use a consumer credit report for employment purposes unless the
position of the person for whom the report is sought is any of the following:
(1) A managerial position.
(2) A position in the state Department of Justice.
(3) That of a sworn peace officer or other law enforcement position.
(4) A position for which the information contained in the report is required by law to be disclosed or obtained.
(5) A position that involves regular access, for any purpose other than the routine solicitation and processing of credit card
applications in a retail establishment, to all of the following types of information of any one person:
(A) Bank or credit card account information.
(B) Social security number.
(C) Date of birth.
(6) A position in which the person is, or would be, any of the following:
(A) A named signatory on the bank or credit card account of the employer.
(B) Authorized to transfer money on behalf of the employer.
(C) Authorized to enter into financial contracts on behalf of the employer.
(7) A position that involves access to confidential or proprietary information, including a formula, pattern, compilation, program, device, method, technique, process or trade secret that (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who may obtain economic value from the disclosure or use of the information, and (ii) is the subject of an effort that is reasonable under the circumstances to maintain secrecy of the information.
(8) A position that involves regular access to cash totaling ten thousand dollars ($10,000) or more of the employer, a customer, or client, during the workday.
(b) This section does not apply to a person or business subject to Sections 6801 to 6809, inclusive, of Title 15 of the United States Code and state and federal statutes or regulations implementing those sections if the person or business is subject to compliance oversight by a state or federal regulatory agency with respect to those laws.
(c) The following definitions apply to this section:
(1) “Consumer credit report” has the same meaning as defined in subdivision (c) of Section 1785.3 of the Civil Code, but does
not include a report that (A) verifies income or employment, and (B) does not include credit-related information, such as credit
history, credit score, or credit record.
(2) “Managerial position” means an employee covered by the executive exemption set forth in subparagraph (1) of paragraph
(A) of Section 1 of Wage Order 4 of the Industrial Welfare Commission (8 Cal. Code Regs. 11040).