States of Colorado and Nevada Enact Laws Prohibiting Applicant and Employee Credit Checks

APPLIES TO

CO and NV Employers

EFFECTIVE

July 1, 2013 (Colorado)

October 1, 2013 (Nevada)

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On July 1 and October 1, 2013, Colorado and Nevada will become the ninth and tenth states, respectively, to enact laws restricting the use of credit-related information for hiring or other employment purposes. States that have enacted similar legislation are California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont and Washington. Listed below are summaries of the new Colorado and Nevada laws.

Colorado

Colorado’s Employment Opportunity Act (S.B. 18) prevents covered employers with four or more employees from using consumer credit information in making employment decisions. This includes evaluating a person for employment, hiring, promotion, demotion, reassignment, compensation adjustment, or retention.

The law makes exceptions for certain types of employers and positions. 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;
  • The report is substantially related to the employee’s current or potential job, and the employer has a bona fide purpose for making the request, which is disclosed in writing to the employee.

Under the new law, “substantially related to the employee’s current or potential job” means that the position constitutes executive or management personnel or their staff for specified purposes, or involves federal government contracts with defense, intelligence, national security or space agencies.

The law specifies the steps an employer must take if consumer credit information results in an adverse action. The law also sets forth procedures and remedies for aggrieved applicants and employees in the event of violations.

 

Nevada

Senate Bill 127 amends existing Nevada statutes to prevent employers from conditioning employment on a consumer credit report or other credit information.

This new law prohibits private employers and persons acting on their behalf from: (1) directly or indirectly requiring, requesting, suggesting, or causing any current or prospective employee to submit to a consumer credit report or other credit information as a condition of employment; (2) using, accepting, referring to or inquiring regarding a consumer credit report or other information; (3) disciplining, discharging, discriminating against, denying promotion or employment, or threatening action against a current or prospective employee or who refuses or fails to submit a consumer credit report or other information, or on the basis of results of same; or (4) disciplining, discharging, discriminating against, denying promotion or employment, or threatening action against a current or prospective employee who files a complaint, testifies in a legal proceeding or exercises their rights related to this law.

Nevada’s new law provides exemptions under which credit information may be used in background screening:

  • When required or authorized under state or federal law;
  • Upon reasonable belief that the current or prospective employee has engaged in an activity that may violate state or federal law;
  • When the information contained in the report or other credit information is either “job related” or reasonably related to the position that the current or prospective employee is being evaluated for employment, promotion, reassignment, or retention.

“Job related” includes positions which involve (1) responsibility for financial assets; (2) access to confidential information; (3) managerial or supervisory responsibility; (4) direct law enforcement authority as an employee of a state or local law enforcement agency; (5) responsibility for, or access to, financial information of another person; (6) employment with a financial institution; or (7) employment with a licensed gaming establishment. The law sets forth substantial private and public rights of recovery for violations. Among other things, the Labor Commissioner may impose administrative penalties of up to $9,000 for each violation, and may also bring its own civil action against the employer.

 

Action Items:

  1. Employers with employees in Colorado, Nevada or any of the other eight state restricting consumers background checks should carefully review their background check policies and procedures and modify accordingly to ensure full compliance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2013 ManagEase, Incorporated.

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