Colorado Background Check Laws: FCRA Steps and Penalties

Colorado background check laws control what you can ask a job applicant, when you can ask it, and what you can do with the answer. Since September 2021, every private employer in the state has been barred from asking about criminal history on an initial application, credit checks are limited to a narrow set of jobs, sealed records are off-limits even if you learn about them, and the federal Fair Credit Reporting Act adds consent and notice steps on top of all of it. Miss any of these and you’re looking at state fines, FCRA class actions, or a discrimination claim.

When You Can Ask About Criminal History

The Colorado Chance to Compete Act (C.R.S. 8-2-130) applies to every private employer and employment agency in the state, regardless of headcount. State and local government employers are excluded from this particular statute and can ask about criminal history at any point.1Colorado Department of Labor and Employment. Colorado Chance to Compete Act FAQs

Covered employers cannot:

  • State in a job advertisement that applicants with a criminal history may not apply.
  • Include criminal history questions on an initial written or electronic application.
  • Require an applicant to disclose their criminal history at the application stage.

The restriction is on the initial application only. You can pull a publicly available criminal background report on an applicant at any time, and you can ask about criminal history in interviews and later steps of hiring.2FindLaw. Colorado Revised Statutes 8-2-130 – Criminal History Limits on Advertisements and Applications

Sealed and Expunged Records You Cannot Use

Under C.R.S. 24-72-703, once a criminal record is sealed, you cannot require the applicant to disclose anything it contained, on an application, in an interview, or anywhere else. The applicant may legally answer that they have no criminal conviction, and you cannot deny employment because someone refuses to disclose sealed information.3Justia. Colorado Code 24-72-703 – Sealing of Criminal Justice Records

Expunged arrest records get similar treatment under C.R.S. 24-72-702, which specifically covers arrest records expunged due to mistaken identity. You cannot require disclosure, and the applicant can truthfully say the arrest never happened.4Justia. Colorado Code 24-72-702 – Expungement of Arrest Records in Case of Mistaken Identity

If you learn about a sealed record through some other channel, you still cannot factor it into your decision.

When You Can Pull a Credit Report

Colorado’s Employment Opportunity Act (C.R.S. 8-2-126) covers all private and public employers with four or more employees, except state and local law enforcement agencies. It prohibits using consumer credit information for employment decisions unless the information is substantially related to the job.5Colorado Department of Labor and Employment. Colorado Employment Opportunity Act – INFO 9D

“Substantially related” is defined narrowly. A credit check is permissible only where the position is:

  • Any role at a bank or financial institution.
  • A position involving contracts with federal defense, intelligence, national security, or space agencies.
  • An executive or management role that involves setting business direction, fiduciary responsibility, access to personal or financial information beyond what appears in a normal retail transaction, or authority to issue payments, collect debts, or enter contracts.

A warehouse worker, retail cashier, or most mid-level employees will not meet the standard. Handling small amounts of cash doesn’t get you there on its own.6Justia. Colorado Code 8-2-126 – Employer Use of Consumer Credit Information

FCRA Steps for Any Third-Party Background Check

The moment you use a third-party consumer reporting agency to run a background check, the federal Fair Credit Reporting Act applies on top of Colorado law. Company size and industry don’t matter.

Consent and Disclosure

Before obtaining a consumer report for employment purposes, you must give the applicant a clear written disclosure stating that you intend to get a background report. It has to be a standalone document, not buried inside an application or a stack of onboarding forms. The applicant then authorizes the report in writing.7Office of the Law Revision Counsel. 15 USC 1681b – Permissible Purposes of Consumer Reports Combining the disclosure with other paperwork is one of the most common compliance failures and a frequent basis for litigation.

The Adverse Action Sequence

If you’re going to reject someone based in whole or part on a background report, the FCRA requires a specific order of steps before you finalize the decision. First, send a pre-adverse action notice that includes a full copy of the report and a summary of the applicant’s rights under the FCRA. Then wait a reasonable period, generally at least five business days, so the applicant can review the report and dispute errors.8Federal Trade Commission. Background Checks on Prospective Employees – Keep Required Disclosures Simple

After the waiting period, if you’re still moving forward, send a final adverse action notice. It has to include the name and contact information of the consumer reporting agency, a statement that the agency did not make the hiring decision, and notice of the applicant’s right to dispute the report and get a free copy within 60 days. Skipping straight from report to rejection is how FCRA lawsuits start.

Evaluating a Criminal Record Without a Discrimination Claim

Even where you can legally consider criminal history, a blanket policy of rejecting anyone with a record creates disparate impact exposure under Title VII. The EEOC’s enforcement guidance points to three factors employers should weigh when evaluating a conviction:

  • The nature and gravity of the offense.
  • The time that has passed since the offense or the completion of the sentence.
  • The nature of the job being sought.

The agency recommends an individualized assessment for each applicant rather than automatic disqualification: give the person a chance to explain the circumstances, show evidence of rehabilitation, and address why the conviction shouldn’t be disqualifying for the specific role.9U.S. Equal Employment Opportunity Commission. Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Colorado’s Anti-Discrimination Act also allows individuals to file discrimination complaints where background checks produce a disparate impact on protected classes.

Industries Where Checks Are Required by Law

Some Colorado employers don’t just have permission to run checks; they’re required to.

Licensed childcare facilities must conduct criminal history background checks as part of the licensing process under C.R.S. 26-6-104 and related provisions in C.R.S. 26-6-106.3 and 26-6-107.10Justia. Colorado Code 26-6-104 – Licenses – Out-of-State Notices and Consent Employers hiring people to provide direct care to at-risk adults must request a check through the Colorado Adult Protective Services (CAPS) system before hiring, to determine whether the applicant has been involved in a substantiated case of mistreatment. C.R.S. 26-3.1-111 controls.11FindLaw. Colorado Code 26-3.1-111 – Access to CAPS

Real estate broker license applicants must submit fingerprints to the Colorado Bureau of Investigation for a state and federal criminal history check before they can even file the license application. The applicant pays the CBI fee, and results go to the Real Estate Commission.12Justia. Colorado Code 12-10-203 – Application for License – Rules – Definition

Federal law preempts state limits in some sectors. Motor carriers must investigate each commercial driver’s safety performance history and driving record for the preceding three years and pull motor vehicle records annually.13eCFR. 49 CFR 391.23 – Investigation and Inquiries Section 19 of the Federal Deposit Insurance Act prohibits FDIC-insured depository institutions from employing anyone convicted of a crime involving dishonesty, breach of trust, or money laundering without prior written consent from the FDIC.14Office of the Law Revision Counsel. 12 US Code 1829 – Penalty for Unauthorized Participation by Convicted Individual

Social Media Screening

Reviewing an applicant’s social media is legal in most cases, but it exposes you to information about race, age, religion, disability, and national origin, all protected characteristics. Once you’ve seen it, proving your decision had nothing to do with it gets harder.

The EEOC has said personal information from social media may not be used for employment decisions on prohibited bases including race, gender, national origin, religion, age, disability, or genetic information. The agency suggests having someone who is not involved in the hiring decision conduct any social media review, and relying only on publicly available information rather than asking for account passwords.15U.S. Equal Employment Opportunity Commission. Social Media Is Part of Today’s Workplace but Its Use May Raise Employment Discrimination Concerns

How Long to Keep the Records

EEOC regulations require employers to keep all personnel and employment records for at least one year. If an EEOC charge has been filed, you must retain records related to the charge until final disposition, including any resulting lawsuit.16U.S. Equal Employment Opportunity Commission. Recordkeeping Requirements That covers the background report itself, the written consent, and any adverse action notices you sent.

What Noncompliance Costs

The Colorado Department of Labor and Employment enforces the Chance to Compete Act on a graduated scale:

An employee harmed by a violation of the Employment Opportunity Act can file a complaint with the Division of Labor Standards and Statistics. After investigation and a hearing, the division may impose civil penalties of up to $2,500.17Colorado Department of Labor and Employment. Colorado Employment Opportunity Act 8-2-126 CRS

FCRA exposure is where the numbers get large. A willful violation entitles the consumer to statutory damages between $100 and $1,000 per violation, or actual damages if higher, plus possible punitive damages and reasonable attorney’s fees.18Office of the Law Revision Counsel. 15 US Code 1681n – Civil Liability for Willful Noncompliance Because FCRA claims can be brought as class actions, one procedural mistake repeated across hundreds of applicants can produce serious liability. The most common triggers are still the same two: a disclosure that isn’t standalone, and a rejection that skips the pre-adverse action notice.