Monthly Archives: May 2013

May 29, 2013

October 1 Deadline for Employers to Provide Notice of Health Care Exchange

Calendar_October_01By Elizabeth Nedrow

Employers recently were given the green light on a notice requirement related to health care reform. 

The central feature of much of health care reform is the exchange system. No later than October 1, 2013, employers must provide each employee a written notice:

  • Informing the employee of the existence of the exchange including a description of services provided by the exchange, and the manner in which the employee may contact the exchange to request assistance;
  • Explaining that the employee may be eligible for a premium tax credit if the employee purchases a qualified health plan through the exchange; and
  • Including a statement informing the employee that if the employee purchases a qualified health plan through the exchange rather than choosing employer-offered health coverage (if any), the employee may be foregoing the employer's contribution (if any) to the employer-offered health coverage, as well as a statement that such employer contributions are often excludable from income for federal income tax purposes.

 Read our entire alert on this notice requirement here

May 28, 2013

Addressing ADA Concerns When Employee is Physically Able But Psychologically Impaired

By Jude Biggs

The Tenth Circuit's decision in Koessel v. Sublette County Sheriff's Dep't, No. 11-8099 (10th Cir. May 14, 2013) raises an interesting issue: if an employee’s doctor says he can physically perform the essential functions of his job, but another doctor says psychological issues may interfere with his ability to perform his job, must an employer keep him on the job? The good news? Koessel says , “No.”

Kevin Koessel worked as a patrol officer with the Sublette County Sheriff's Office when he suffered a stroke. After he recovered, he worked part-time until he was cleared to work full-time. Co-workers reported concerns about his behavior, so a neurologist examined him. The neurologist found him physically able to work from a neurological standpoint, but recommended Koessel be examined by a psychologist due to cognitive issues. The psychologist found some of Koessel's symptoms (for instance, fatigue, episodes of lightheadedness, and weeping) could interfere with the performance of the high-stress parts of his job. Koessel returned to a temporary position, but was terminated after funds were cut from the Sheriff’s budget. Koessel sued for, among other things, disability discrimination under the ADA.

Koessel’s employer argued it properly let him go, as he was unable to do essential functions of his job. The psychologist had recommended Koessel be placed in a low-stress position that did not require frequent contact with the public; hence, he could not preserve the peace at public gatherings, neighborhood disputes and family quarrels; testify in court; or apprehend suspects. Koessel agreed those were essential job functions, but argued he could do them because his own doctor cleared him to return to work full time and he had performed 35 traffic stops without incident after returning from work.

The Tenth Circuit concluded Koessel’s examples only showed he could do the job physically, not that he could handled his job psychologically in high-stress situations. In so ruling, the Tenth Circuit disagreed that a jury should decide the issue of whether Koessel was qualified for his job, because there was no indication the psychologist's report was unreliable; there was no question Koessel remained impaired cognitively and psychologically; and there was no evidence Koessel had encountered high-stress situations after returning to work.

Employers will deal more and more with Koessel-like situations as baby boomers age and suffer strokes, heart attacks, or other medical issues that can have an impact on cognitive abilities. It shows the importance of getting an expert/specialist’s opinion before making a termination decision, as a specialist’s opinion is more likely to “trump” a general practitioner’s opinion. Still, given the risk of disability and age related discrimination issues, and the sympathy a jury is likely to feel for a former employee who has health issues, it also shows the importance of proceeding with great care (and with the advice of counsel) before making such termination decisions.

May 23, 2013

5 Tips for Handling Holiday Pay

American-flag-photo-clipartBy Joanna Vilos 

With a holiday weekend upon us, it’s a good time to address holiday pay concerns.  Many employers struggle with how to pay employees for holidays, especially when the holiday overlaps overtime hours, FMLA leave, or another provided benefit.  Here are some tips to help guide you through the pay issues so that you may enjoy the holiday. 

1.  Holiday Pay Is Not Required  

Employers are not required to provide holiday pay under federal law.  That means you don’t have to pay non-exempt employees holiday pay for taking the day off.  Of course, if non-exempt employees perform work on a holiday, you need to pay them their normal wages for all hours worked.  But no premium pay is required.  For exempt employees, in order to meet the salary requirement to maintain exempt status, you cannot dock their salary if they do not work on the holiday.   

Even though it is not required by law, many employers choose to offer holiday pay as a company-provided benefit.  If your company offers holiday pay, read further for additional tips. 

2.  Holiday Policy May Provide Conditions 

You may establish conditions that must be met in order for an employee to receive holiday pay.  For example, you may require that an employee work the day before and after a paid holiday in order to receive holiday pay.  If you include such conditions in your holiday policy, be sure to communicate your policy to your employees and then enforce the policy uniformly and consistently. 

3.  Paid Holiday Hours Need Not Be Counted When Determining Overtime 

If you provide holiday pay to employees who do not work on the holiday, you do not have to count the paid holiday hours as hours worked for purposes of determining whether an employee is entitled to overtime that week.   

4.  Holidays During FMLA Leave 

If a holiday falls when an employee is out on FMLA leave, holiday pay will be due if you have a policy of providing holiday pay to employees out on other types of unpaid leave.  However, if your policy is not to pay holiday pay to employees out on other types of leave, then you do not have to provide holiday pay to the employee on FMLA leave.  In other words, you must treat the employee on FMLA leave the same as you would treat employees on other non-FMLA leaves as found in your company policies. 

5.  Holiday on Regular Day Off or During Vacation 

What do you do if a holiday falls on an employee’s regular day off or during a scheduled vacation?  Because holiday pay is a company-provided benefit, you can choose what to do in such situations.  Perhaps you choose to allow such employees to observe the holiday on the preceding work day.  Or instead you choose to allow the employee to pick any other regular workday off.    Perhaps you decide to pay the holiday pay but not allow another day off.  Whatever you choose to do, establish a uniform policy that will work for your operation, let employees know what your policy is and ensure that you treat all similarly-situated employees similarly. 

Hopefully these tips help take the stress out of your holiday.  Always review the law in your state to make sure your policies comply with state-specific requirements.

May 20, 2013

Colorado Expands FMLA Coverage to Civil Union and Domestic Partners

By Alyssa Yatsko

Under the newly passed Family Care Act (House Bill 13-1222), Colorado employers must extend leave under the federal Family and Medical Leave Act (FMLA) to permit eligible employees to care for their civil union partner or domestic partner who has a serious health condition.  The law goes into effect on August 7, 2013 so covered employers should act now to update their FMLA policies and procedures.  Here are the details of this new Colorado law. 

FMLA Leave Available to Care for Civil Union Partner or Domestic Partner 

Prior to this law, Colorado employees seeking to take job-protected family or medical leave looked only to the federal FMLA.  Under the federal FMLA, leave to care for a family member with a serious health condition is limited to the employee's spouse, child or parent. The federal FMLA does not permit leave for an employee to care for his or her civil union partner or domestic partner.  The Family Care Act allows an eligible employee in Colorado to take leave to care for the employee’s partner in a civil union or the employee’s domestic partner (if the employer recognizes the person as the employee’s domestic partner or the domestic partnership is registered with the municipality or the state, as applicable).  The employer may require that the employee provide reasonable documentation or a written statement of the family relationship as well as medical certifications as may be required under the FMLA.  Upon meeting these terms, eligible employees are entitled to take up to 12 weeks of unpaid FMLA leave in a 12-month period. 

“Double Dipping” of FMLA Leave 

We have previously written in this blog about how the Family Care Act potentially could permit certain employees to take up to 24 weeks of FMLA leave in a 12-month period.  However, the circumstances in which this may occur is limited, meaning many employers will not face a “double dipping” situation.  To learn more, check out our previous post

Colorado’s Family Care Act not as Expansive as First Proposed 

As enacted, the Family Care Act is greatly downsized from the original bill introduced into the Colorado House in February.  The initial bill would have expanded the group of family members for whom Colorado employees are entitled to take leave under the federal FMLA to include care for any person related to the employee by blood, adoption, legal custody, marriage or civil union partners and domestic partners.  This would have permitted leave to care for siblings, grandparents, grandchildren and in-laws, regardless of age or dependency.  Due to significant opposition by business groups, the bill was amended to remove all additional family members except civil union and domestic partners for the expanded FMLA coverage.   

Update Your FMLA Policies and Forms Now 

To prepare for the August 7th effective date of the new leave entitlement, covered Colorado employers should revise their FMLA policies and forms now to include provision of leave to care for a civil union partner or domestic partner with a serious health condition.  Remember to update the FMLA policy contained in your employee handbook.  As always, it is wise to consult with your legal counsel to ensure your policies and practices comply with all applicable laws.

May 15, 2013

Colorado Prohibits Employer Access to Social Media Accounts

By Alyssa Yatsko 

Under a new bill recently signed into law by Colorado Governor John Hickenlooper, employers are prohibited from requiring access to an applicant’s or employee’s personal social media account.   Violations could result in penalties and fines.  Here are the details of this new law. 

Employers Denied Access to Private Social Media Accounts 

Colorado joins the growing trend of states restricting employer access to private social media and other online accounts of job applicants and employees.  Colorado’s new law, House Bill 13-1046,  applies to any employer engaged in a business, industry, trade or profession in the state, except government law enforcement agencies.  It prohibits employers from suggesting, requesting or requiring that an applicant or employee disclose their user name, password or other means of accessing their personal account or online services.  Employers also may not compel an applicant or employee to add anyone to their list of contacts (e.g., to “friend” on Facebook, etc.) or to change their privacy settings on their social media accounts.  Employers violate this law if they discipline, discharge or otherwise penalize an employee, or fail to hire an applicant who refuses to disclose any of the prohibited information or refuses to add the employer to their contacts or to change their privacy settings. 

A person harmed by an employer’s violation of the law may file a complaint with the Colorado Department of Labor and Employment (CDLE).  The CDLE is required to investigate the complaint and issue findings within 30 days after a hearing.  The law provides that the CDLE may create rules regarding the penalties for violations, including imposing fines of up to $1,000 for a first violation and up to $5,000 for each subsequent violation. 

Access Permitted for Company Systems and Certain Investigations  

Two exceptions to the prohibition on requiring access to online accounts are spelled out in the law.  First, employers are permitted to require employees to disclose any user name, password or other access to non-personal accounts or services that provide access to the employer’s internal computer or information systems.  Second, employers are allowed to conduct investigations in two areas:  (1) to ensure compliance with applicable securities or financial law or regulatory requirements based on the receipt of information about the use of a personal online account by an employee for business purposes; and (2) to investigate whether an employee has made an unauthorized posting of the employer’s proprietary information or financial data to a personal online account.  No “fishing expeditions” are allowed under the investigative exceptions; employers may only access personal online information for these investigative purposes following the receipt of information that the employee is using his or her personal online accounts in these specific, inappropriate ways. 

Employers Permitted to Enforce Non-Conflicting Policies 

Existing employment policies that do not conflict with the provisions of this new law are permissible and may be enforced.  Employers should examine their policies and practices that may conflict with this law and revise them to remove any requirements or actions prohibited by this law.  Specifically, employers should revisit their background check practices related to social media, workplace investigation procedures, policies governing use of company computers, electronic accounts and personal online accounts as well as any other policy addressing technology and employer access to accounts.

May 14, 2013

D.C. Circuit Court Tears Down NLRB Poster Rule

By Brad Williams

The writing’s still not on the wall.  On May 7, 2013, the U.S. Court of Appeals for the District of Columbia Circuit rejected the National Labor Relations Board’s (NLRB) controversial poster rule requiring 6 million private employers to post a government-issued notice advising employees of their union-related rights.  The rule remains in limbo pending a related appeal in the U.S. Court of Appeals for the Fourth Circuit, and potential appeal to the U.S. Supreme Court.

Poster Rule and Business Group Backlash

The controversial rule was issued in August 2011 under the NLRB’s purported statutory authority to enact rules “necessary” to carrying out the National Labor Relation Act’s provisions.  The Board had long been empowered under Section 6 of the Act to engage in administrative rulemaking, but had generally eschewed this power to enforce union-related rights through case-by-case adjudication.  In justifying its unusual poster rule, the NLRB claimed that many employees were unaware of their union-related rights.  It cited the small percentage of unionized employees in the private workforce, and claimed that immigrants and high school students were particularly unlikely to be aware of their workplace rights.

The NLRB poster rule required all private employers covered by the Act—6 million businesses—to post an 11-by-17 inch government-issued notice in “conspicuous places,” and on intranet or internet sites used to communicate with employees.  The poster advised employees of their rights to organize and join unions, to collectively bargain, and to strike and picket.  Failure to post was an unfair labor practice, and could separately be used as evidence of an employer’s unlawful motive in other Board cases.  The statute of limitations on unfair labor practice charges would also be tolled in cases where employers failed to post.

Business groups excoriated the rule as unbalanced.  The poster did not advise employees of their additional rights to decertify unions, to refuse to pay dues in right-to-work states, or to object to dues payments in excess of those needed for representational purposes.  The rule also arguably implicated employers’ free speech rights, and exceeded the NLRB’s Section 6 authority because the Act does not expressly mandate that the Board educate employees about workplace rights.  Some groups claimed that the Obama administration was also improperly attempting to bypass the legislative process through substantive rulemaking.

District Court Challenges and the D.C. Circuit Court’s Injunction

The rule was originally slated to become effective in November 2011, but implementation was twice delayed due to litigation in the U.S. District Courts for the Districts of Columbia and South Carolina.  In the former case, a district court judge upheld the rule as a valid exercise of the Board’s Section 6 power, but invalidated two of its enforcement mechanisms.  Nat’l Ass’n of Mfrs. v. NLRB, 846 F. Supp. 2d 34 (D.D.C. 2012).  In the latter case, a judge held that the Board had exceeded its Section 6 authority because the Act nowhere required employers to post notices of employee rights.  Chamber of Commerce v. NLRB, 856 F. Supp. 2d 778 (D.S.C. 2012).

Both district court opinions were appealed.  Just two weeks before it was finally scheduled to become effective—on April 30, 2012— the D.C. Circuit Court enjoined the rule’s enforcement pending resolution of the District of Columbia appeal.  The NLRB directed its regional offices to not implement the rule pending resolution of the issues before the D.C. Circuit Court.

D.C. Circuit Court’s Opinion

On May 7, 2013, Judges A. Raymond Randolph, Karen Henderson, and Janice Rogers Brown of the D.C. Circuit Court—all Republican appointees—rejected the rule after finding each of its enforcement mechanisms incompatible with the Act.

Writing for the court, Judge Randolph first noted that the Act’s free speech provision—Section 8(c)—precluded the NLRB from finding employer speech containing no threat of reprisal or promise of benefit to be an unfair labor practice, or evidence of such a practice.  But he found that the poster rule did precisely that.  It provided that failure to post was both an unfair labor practice, and could be used as evidence of other unfair labor practices.  Drawing on First Amendment jurisprudence, he rejected any claim that the government-issued poster merely reflected the Board’s, and not an employer’s, speech.  First Amendment principles protect both the “dissemination” and the “creation” of messages.  They also protect the right not to speak, so the “right to disseminate another’s speech necessarily includes the right to decide not to disseminate it.”  Judge Randolph thus found two of the rule’s enforcement mechanisms invalid.

He next held that the rule’s purported tolling of the statute of limitations in cases where employers failed to post the notice was incompatible with Congressional intent.  The Board failed to prove that in enacting the 6-month statute of limitations on unfair labor practice charges, Congress contemplated potential tolling where employers failed to post, or where employees were unaware of their union-related rights.  Judge Randolph thus held that the rule’s remaining enforcement mechanism was also invalid.

Because each of its enforcement mechanisms conflicted with the Act, Judge Randolph rejected the rule’s notice posting requirement after noting that the NLRB had expressly rejected the option of issuing a rule that depended solely on voluntary compliance.

In a concurring opinion, Judges Henderson and Brown agreed with Judge Randolph’s reasoning, but would have taken his decision one step further.  They argued that, regardless of whether the enforcement mechanisms were valid, the NLRB lacked Section 6 authority to issue the poster rule.  They urged that the Act invested with Board with only reactive power—such as responding to unfair labor practice charges, or responding to election petitions filed by parties—but not any proactive authority to guard against potential statutory violations.  “The NLRA,” they concluded, “simply does not authorize the Board to impose on an employer a freestanding obligation to educate its employees on the fine points of labor relations law.”  Nat’l Ass’n of Mfrs. v. NLRB, No. 12-5068 (D.C. Cir. May 7, 2013).

Fourth Circuit Appeal and Potential U.S. Supreme Court Review

While the D.C. Circuit Court firmly rejected the poster rule, the related challenge from South Carolina remains pending before the Fourth Circuit.  That court heard oral arguments in the case in March 2013, and the parties have already submitted their differing interpretations of the D.C. Circuit court’s opinion in supplemental filings.  The Board has not yet updated its website to address the effect, if any, the D.C. Circuit’s opinion may have on its own enforcement position.

Regardless of how the Fourth Circuit eventually rules, the NLRB’s poster rule seems likely to end up before the U.S. Supreme Court.  The writing’s still not on the wall, but the Supreme Court is one step closer to posting its own thoughts on the matter.

May 7, 2013

Small Colorado Employers Face Higher Damages for Discrimination Claims

By Mark Wiletsky and Steve Gutierrez

Small businesses beware: your employees now have more incentive to sue you.  As of January 1, 2015, employees can recover compensatory and punitive damages for employment discrimination claims against businesses that employ between one to fourteen people under Colorado’s Job Protection and Civil Rights Enforcement Act of 2013, signed into law by Governor John Hickenlooper on Monday, May 6, 2013.  But don’t despair.  By taking some proactive steps now, businesses can minimize their exposure to potential claims. 

Increased Exposure for Small Employers 

Colorado’s new anti-discrimination law changes the landscape for small employers by allowing compensatory and punitive damages against Colorado’s small businesses (with 1-14 employees), along with attorneys’ fees and costs to the employee if he or she prevails, back pay, front pay, interest, and other potential relief.  Thankfully, the new Colorado law contains some safeguards against outrageous damage awards that would likely put small employers out of business.  For businesses with 1-4 employees, compensatory and punitive damages are capped at $10,000.  For businesses with 5-15 employees, such damages are capped at $25,000.  Businesses with greater than 15 employees are subject to the existing damages caps found in the federal anti-discrimination laws. 

The availability of these damages to employees of businesses with fewer than 15 employees will likely result in more discrimination cases filed in Colorado against small businesses, significantly raising the potential exposure for small business owners.  That is especially true given that such claims may be filed in state court, which is often viewed by attorneys representing employees as a more favorable forum for such claims. 

Age Discrimination No Longer Cut Off at Age 70 

The Job Protection and Civil Rights Enforcement Act of 2013 also eliminates the age 70 cutoff for age discrimination claims brought under Colorado law.  This brings the state law into line with the federal Age Discrimination in Employment Act which does not have an upper age limit.  Consequently, employees age 40 and older are protected from employment discrimination under both state and federal law. 

Good Faith Efforts May Avoid Punitive Damages 

Under the new Colorado law, employers will not be subject to punitive damages if they can demonstrate good-faith efforts to prevent discriminatory and unfair employment practices in the workplace.  In addition, no punitive damages are available in a lawsuit involving a claim of failure to make a reasonable accommodation for a disability if the employer can demonstrate good-faith efforts to identify and make a reasonable accommodation that would provide the disabled employee with an equally effective opportunity and would not cause an undue hardship on the employer’s operation.  Small businesses should begin those good-faith efforts now so that policies and procedures to prevent and respond to discrimination are in place when the law goes into effect. 

Steps Small Businesses Should Take to Minimize Risk 

Unfortunately for small businesses, the mere threat of a lawsuit, however meritless, may stretch tight resources to the breaking point.  That is why it is so important to take proactive measures now, which will help minimize the risk of such lawsuits.  Among other things, small businesses should:  

1)  Adopt and distribute policies that prohibit discrimination, harassment, and retaliation in the workplace.  Require new and existing employees to acknowledge their receipt of these policies, preferably on an annual basis. 

2)  Train supervisors, managers and employees.  Everyone in the workplace should be trained on your anti-discrimination policies and procedures with specialized training provided to supervisors and managers who must recognize harassment and discrimination and know what to do when they observe it or receive a complaint.  In small workplaces, dealing with complaints of discrimination or retaliation can be difficult.  Still, if you address it promptly and appropriately, you will be in a better position to avoid or defend against a claim. 

3)  Document performance issues.  We often see meritless lawsuits filed because legitimate performance concerns were not shared with the employee or appropriately documented.  If an employee has performance issues, be sure to get it in writing.  Focus on the problem, give concrete examples, and warn the employee that a failure to achieve immediate and sustained improvement may result in termination. 

4) Arbitration agreements. Consider whether it would be appropriate to have employees sign an arbitration agreement.  Such agreements take discrimination claims out of the civil court system, and generally allow for a more streamlined resolution.  However, arbitration is not necessarily cheaper than a court proceeding; in fact, in some cases it might cost more.  Be sure to consider all the benefits and burdens of arbitration before relying on such agreements.  And if you prefer arbitration, make sure your agreement complies with all applicable legal requirements.   

Essentially, small employers need the same policies and procedures to deal with discrimination as larger employers do, even though many smaller employers simply do not have the same resources.  Take the next 18 months before the law becomes effective to educate yourself, your supervisors and your employees on discrimination issues and take the steps that will help minimize your risk to the damages that will be available soon to aggrieved employees. 

May 6, 2013

Colorado Restricts Employers’ Use of Credit Reports

By Mark Wiletsky 

Employers using credit reports to evaluate applicants and employees take note: Colorado recently enacted the “Employment Opportunity Act” limiting the use of credit reports in employment decisions.  In passing this law, Colorado joins eight other states–California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont and Washington–in restricting employers from obtaining and/or using credit history information when evaluating applicants and employees.   The new Colorado law exempts certain job positions from the prohibition on the use of credit reports, but the exceptions are very fact specific.  Employers need to analyze the job responsibilities of the position at issue in order to determine if they may use credit information under this new law. 

Prohibition on the Use of Consumer Credit Information for Employment Purposes 

Effective July 1, 2013, section 8-2-126 of the Colorado Revised Statutes provides that an employer shall not use consumer credit information for employment purposes unless the credit information is substantially related to the employee’s current or potential job.  This means that Colorado employers are prohibited from using credit information in the employment context except in those limited situations where credit or financial responsibility is substantially related to the job.  The type of information prohibited under this law includes any written, oral or other communication of information that bears on a consumer’s creditworthiness, credit standing, credit capacity or credit history.  This includes a credit score, but does not include the name, address or date of birth of an employee associated with a social security number. 

“Substantially Related” Analysis Looks to Job Responsibilities 

When determining whether a particular position falls within the exception where credit information is “substantially related to the employee’s current or potential job,” employers may not rely on an informal, best-guess determination.  Instead, employers must carefully analyze whether the job in question meets the parameters detailed in the new law.  

Under Colorado’s law, “substantially related to the employee’s current or potential job” is defined to apply to positions that: 

1)         Constitute executive or management personnel or officers or employees who constitute professional staff to executive and management personnel, and the position involves one or more of the following: 

                A)    Setting the direction or control of a business, division, unit or an agency of a business;

                B)    A fiduciary responsibility to the employer;

                C)    Access to customers’, employees’, or the employer’s personal or financial information (other than information ordinarily provided in a retail transaction); or

                D)    The 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.

Consider this example:  you are hiring a human resource specialist who will administer employee benefits within your company.  May you obtain and use a credit report on applicants for this position?  Assuming this position does not involve federal defense, intelligence, national security or space agency contracts, you first must determine if this position is an executive or management position, or alternatively, if this position is considered professional staff to an executive or manager.  In our example, the employee benefits specialist position may or may not be an executive or management position at your company.  If not, the position may be considered professional staff to an executive or manager if the position reports to an HR Director, Vice President or other similar high level manager or officer.  If we assume this position meets this threshold determination, you next must analyze if the position involves one or more of the four areas of responsibilities where credit information will be deemed substantially related.  Because an employee benefits specialist is likely to have access to employees’ personal and perhaps financial information, it appears to fall within the third area of responsibility where credit information will be deemed substantially related to the job, but the answer is certainly not clear-cut.

Requesting Employee Consent to Obtain a Credit Report  

In addition to the prohibition on the use of credit information for employment purposes, the new Colorado law prohibits employers or their agents from requiring an employee to consent to a request for a credit report that contains information about the employee’s credit score, credit account balances, payment history, savings or checking account balances, or savings or checking account numbers 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 employee’s current or potential job andthe employer has a bona fide purpose for requesting or using information in the credit report and is disclosed in writing to the employee.   

The written disclosure requirement here is a new procedural step with which most employers meeting this exception will not be familiar.  Employers meeting these criteria now need to provide applicants/employees with a notice of their business purpose for requesting credit information.

Employee May Be Allowed to Explain Circumstances Affecting Credit 

In those cases when an employer is permitted to use credit information because it is substantially related to the job, an employer may ask the employee to explain any unusual or mitigating circumstances that affected their credit history.  For example, if the credit report shows delinquent payments, the employer may inquire further allowing the employee to explain circumstances that may have caused the delinquencies, such as an act of identity theft, medical expense, a layoff, or a death, divorce or separation.   

Adverse Action Disclosure Required 

If the employer relies on any part of the credit information to take adverse action regarding the employee or applicant, the employer must disclose that fact and the particular information relied upon to the employee.  This disclosure must be made to the employee in writing but can be made to an applicant via the same medium in which the application was made (e.g., if the application was submitted electronically, this disclosure may be sent electronically). 

FCRA Obligations Still Apply 

Employers who are permitted to obtain and use credit reports under the Colorado law must also comply with the requirements of the Fair Credit Reporting Act (FCRA) in order to obtain a credit report from a consumer reporting agency.  These additional FCRA duties include: 

1)         Providing a clear and conspicuous written disclosure to the applicant/employee before the report is obtained, in a document that consists solely of the disclosure, that a consumer report may be obtained;

2)         Getting written authorization from the applicant/employee before obtaining the report;

3)         Certifying to the consumer reporting agency that the above steps have been followed, that the information being obtained will not be used in violation of any federal or state equal opportunity law or regulation, and that, if any adverse action is to be taken based on the consumer report, a copy of the report and a summary of the consumer's rights will be provided to the consumer;

4)         Before taking an adverse action, providing a copy of the report and a summary of FCRA consumer rights to the applicant/employee; and

5)         After an adverse action is taken, sending an adverse action notice to the employee/applicant containing certain FCRA-required statements. 

Credit Check Compliance 

Colorado employers need to review and update their background check policies as they relate to conducting credit checks on applicants and existing employees.  In addition to FCRA obligations, employers wishing to use credit reports have additional restrictions and duties under state law.   

Employers now must analyze whether each position for which they wish to obtain credit reports meets the “substantially related to the employee’s current or potential job” criteria.  If the position meets that criteria and the employer wishes to obtain a credit report on an applicant or existing employee, the employer first must provide a written disclosure to the applicant/employee describing the bona fide purpose of obtaining the credit information.  If the credit report reveals questionable or negative information, the employer may (but is not required to) ask the applicant/employee to explain any unusual circumstances that may have led to the unfavorable credit information.  If the employer rejects the applicant/employee for the position based in any way on the credit report, the employer must provide the required FCRA adverse action notices as well as a written explanation of the particular information in the report that led to the employer’s decision. 

Multi-state employers face unique challenges when obtaining and using credit reports for employment purposes as they must comply with various state laws that now restrict such use.  Given the intricacies of complying with the FCRA and applicable state laws, employers are wise to consult with their counsel to review and update their credit check policies.