Colorado Legislative Wrap-Up

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

The 2013 Colorado legislative session resulted in three new laws that are significant for employers. First, effective July 1, 2013, employers will face new restrictions on their ability to obtain and use consumer credit information for making employment decisions related to employees and applicants. Also effective July 1, 2013, employers will be prohibited from requesting applicants’ and employees’ social media passwords. Third, effective January 1, 2015, the remedies available under the Colorado Anti-Discrimination Act will be expanded, allowing workers to receive greater damages under the Act. 

Consumer Credit Information Restrictions

Colorado’s Employment Opportunity Act, which goes into effect on July 1, 2013, restricts an employer’s ability to obtain and use consumer credit information for making employment decisions related to employees and applicants. The Act defines “employer” to include: (1) the state, and each county, city, town, irrigation, and school district therein, and all public institutions and administrative boards thereof having four or more employees, and (2) every person, association of persons, firm, and private corporation (including any public service corporation, manager, personal representative, assignee, trustee, and receiver) who has four or more persons regularly engaged in the same business or employment in service under any contract of hire, expressed or implied. The Act also covers prospective employers but excludes any state or local law enforcement agency. 

As of July 1, 2013, an employer cannot use consumer credit information for an employment purpose unless the information is substantially related to the employee’s or applicant’s current or potential job. The Act perplexingly suggests that the criteria to use the information found in a credit report is different than the criteria to run a credit report. Specifically, employers cannot require an employee or applicant to consent to a request for a credit report as a condition of employment unless: (1)  the employer is a bank or financial institution; (2) the report is required by law; or (3) the report is substantially related to the individual’s current or potential job, the employer has a bona fide purpose for making the request or using the information in the credit report that is substantially related to the individual’s current or potential job, and the request is disclosed in writing to the individual. To comply with these apparently different standards, we recommend that employers that are banks or financial institutions and employers that run reports where the report is required by law run the report, but refrain from using the report unless the information is substantially related to the employee’s or applicant’s current or potential job.  

“Substantially related to the employee’s current or potential job” means that the information in a credit report is related to the position for which the employee is being evaluated because the position:

(1) is for executive or management personnel (or officers or employees who are professional staff to such personnel), and the position involves:

   (a) setting the direction or control of a business, division, unit, or an agency of a business;
   (b) fiduciary responsibility to the employer;
   (c) access to customers’, employees’, or the employer’s personal or financial information (other than information  provided in a retail transaction); or
   (d) authority to issue payments, collect debts, or enter into contracts; or

(2) involves contracts with defense, intelligence, national security, or space agencies of the federal government.

If an employer is able to obtain and use credit information based on the above and relies on consumer credit information to take adverse action, the employer must disclose that fact and the information relied upon to the employee. This disclosure must be made to employees in writing and made to applicants in the same medium in which the application was made. When the consumer credit information is substantially related to the employee’s or applicant’s current or potential job, an employer may inquire further of the individual to give him or her the opportunity to explain circumstances that could make the credit information attributable to some factor other than poor money management skills.

   This law will be codified at C.R.S. § 8-2-126. 

Prohibition from Requesting Social Media Passwords

With the passage of C.R.S. § 8-2-127 (House Bill 13-1046), Colorado became the latest in a growing list of states to ban employers from requiring applicants or employees to provide them with social media passwords. The law applies to all employers, which is broadly defined to include any person engaged in a business, industry, trade, profession, etc. in the state of Colorado, as well as their agents and representatives. Specifically, the bill prohibits employers from requiring employees or applicants to disclose a user name, password, or other means for accessing a personal account or service through an electronic communications device. It also prohibits employers from compelling employees or applicants to add anyone to their list of contacts. Finally, it prohibits employers from requiring employees or applicants to change privacy settings associated with social networking accounts. 

Employers may not penalize employees or applicants who refuse to provide access to such accounts. However, the law does not prevent an employer from conducting an investigation to ensure compliance with applicable securities or financial laws or regulatory requirements based on the receipt of information about the use of such accounts, or from investigating the unauthorized downloading of the employer’s proprietary information to such accounts. Employers may be fined $1,000 for the first offense and up to $5,000 for each subsequent offense. Colorado employers will need to be very cautious about the use of social media to investigate employees or applicants in light of this new law.

New Remedies Under the Colorado Anti-Discrimination Act

Colorado’s most recent legislative session led to a significant expansion of the Colorado Anti-Discrimination Act (CADA). With a swipe of the pen, Governor John Hickenlooper ensured that Colorado’s business owners, especially small businesses, will be subject to much stiffer penalties and considerably greater costs associated with defending discrimination cases. House Bill 13-1136, signed into law on May 6, 2013, expands the remedies for all claims available under CADA to now include the possibility of punitive damages, compensatory damages, and attorneys’ fees, as well as the right to a trial by jury (with the exception of age discrimination claims). These sizable remedies were previously limited to federal cases involving employers with over 15 employees (20 in the case of age discrimination claims). Now, all employers must face this stark reality. While the total award of punitive and compensatory damages is limited for smaller employers ($10,000 for employers with fewer than five employees; $25,000 for employers with between five and 14 employees), these damages can add up quickly for small businesses. Throw in a probable award of attorneys’ fees for successful plaintiffs, and before long companies may be struggling to stay in business. 

While the bill’s primary effect is to expand the type of employer that is subject to special damage awards, it also expands the type of claims that could lead to special damages due to CADA’s broader scope of protected categories than federal law. For example, claims based on sexual orientation, creed, marital status, and even “lawful off-duty activities,” which were previously limited to back pay and front pay under Colorado law, can now result in punitive and compensatory damages. As a result, employers are likely to see an increase in state claims as well as a likely decrease in cases won on summary judgment. 

The laws have a somewhat delayed effect. The addition of compensatory and punitive damages does not go into effect until January 1, 2015, and attorneys’ fees will not be awarded prior to August 7, 2013. Nevertheless, the changes make it imperative that large and small businesses alike revisit their employment policies to ensure they do not end up fighting this uphill battle without proper preparation.

Note: This article was published in the June 19, 2013 issue of the Colorado eAuthority.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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