Colorado Becomes 9th State to Limit Employer Credit Checks

Author: David B. Weisenfeld, XpertHR Legal Editor

Colorado will become the ninth state to place significant limitations on the use of credit checks for hiring and other employment purposes. Gov. John Hickenlooper (D) has signed the Employment Opportunity Act, which will ban most private-sector employers with four or more employees from conducting credit checks on job applicants or employees. The measure takes effect July 1, 2013. +2013 Bill Text CO S.B. 18.

Under the new law, there are only a few limited exceptions in which an employer may make use of a credit check to screen job applicants or employees. These include high-ranking, executive or management-level positions that involve setting the direction or control of a business; banks or financial institutions; and defense, intelligence, national security or space agencies of the federal government.

The passage of the Colorado law marks the continuation of a growing national trend to restrict employer use of credit checks for employment purposes. All nine states have passed their credit check restrictions since 2007, with seven of those nine having done so in the last three years.

A number of other states are considering placing similar credit check limitations on employers because of concerns that such checks may have the effect of discriminating against minority job applicants. For that reason, the Equal Employment Opportunity Commission also is monitoring the issue closely.

Additional Resources

Recruiting and Hiring > Preemployment Screening and Testing > Conducting Credit Checks

Determine When to Run a Credit Check for Employment Purposes