Colorado Background Check Laws: FCRA Steps and Penalties

Colorado background check laws restrict what you can ask job applicants, when you can ask it, and how you can use what you find. Since September 2021, every private employer in the state has been barred from asking about criminal history on an initial job application, and separate statutes limit credit checks, protect sealed and expunged records, and sit alongside the federal Fair Credit Reporting Act’s consent and notice requirements. Getting any step wrong exposes your business to fines, discrimination claims, and FCRA class actions.

What You Can’t Ask on an Application

The Colorado Chance to Compete Act (C.R.S. 8-2-130) covers every private employer in the state, regardless of size. The law originally applied only to employers with 11 or more employees when it took effect in 2019; on September 1, 2021, the threshold dropped to zero.¹

Under the Act, you 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 form
Require an applicant to disclose their criminal history at the application stage

The restriction is limited to that first application step. You can obtain a publicly available criminal background report on an applicant at any time, and you can ask about criminal history during interviews or later in the hiring process.¹

One boundary worth noting: the Act does not apply to government employers. The statute explicitly excludes the state, local governments, quasi-governmental entities, and political subdivisions, which may ask about criminal history at any point.²

Sealed and Expunged Records

Colorado treats sealed and expunged records as off-limits for employment purposes. Under C.R.S. 24-72-703, once a criminal record is sealed, you cannot require an applicant to disclose any information it contained, whether on an application, in an interview, or at any other stage. An applicant whose record has been sealed may legally state they have no criminal conviction, and you cannot deny employment solely because someone refuses to disclose sealed information.³

Expunged arrest records follow a parallel rule under C.R.S. 24-72-702, which addresses arrests expunged due to mistaken identity. The applicant can truthfully state the arrest never occurred, and you cannot require disclosure.⁴

If you learn about a sealed record through some other channel, you still cannot use it in a hiring decision.

When You Can Run a Credit Check

Colorado’s Employment Opportunity Act (C.R.S. 8-2-126) is among the stricter credit check laws in the country. It prohibits employers from using consumer credit information for employment decisions unless the information is substantially related to the job.⁵ The law covers all private and public employers with four or more employees, except state and local law enforcement agencies.⁶

“Substantially related” is defined narrowly. A credit check is permissible only when the position fits one of these categories:

Any position at a bank or financial institution
Positions involving contracts with federal defense, intelligence, national security, or space agencies
Executive or management roles that involve setting business direction, carrying fiduciary responsibility, accessing personal or financial information beyond what appears in a normal retail transaction, or having authority to issue payments, collect debts, or enter contracts

You cannot run a credit check on a warehouse worker, a retail cashier, or most mid-level employees. Handling small amounts of cash alone does not meet the threshold.⁵

The FCRA Steps You Have to Follow

Any time you use a third-party consumer reporting agency to run a background check, the federal Fair Credit Reporting Act layers its own requirements on top of Colorado law. These apply regardless of company size or industry.

Disclosure and Consent

Before obtaining a consumer report for employment purposes, you must provide the applicant with a clear written disclosure stating that you intend to get a background report. The disclosure must be a standalone document, not combined with other paperwork, and the applicant must then authorize the report in writing.⁷ Burying the disclosure in an application packet is one of the most common compliance failures and a frequent source of litigation.

Pre-Adverse and Adverse Action Notices

If you decide not to hire someone based in whole or in part on a background report, the FCRA requires a specific sequence before you finalize that decision. First, send a pre-adverse action notice that includes a full copy of the background report and a summary of the applicant’s rights under the FCRA. Give the applicant a reasonable period, generally at least five business days, to review the report and dispute errors.⁸

After the waiting period, if you proceed, send a final adverse action notice. It must 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 obtain a free copy within 60 days. Skipping the pre-adverse step and going straight to rejection is the fastest route to an FCRA lawsuit.

Industries Required to Run Background Checks

Some Colorado industries face mandatory screening rules that override general practice.

Childcare and At-Risk Adult Care

Childcare facilities licensed in Colorado must conduct criminal history background checks as part of the licensing process under C.R.S. 26-6-104 and related provisions.⁹ Employers hiring workers to provide direct care to at-risk adults must request a check through the Colorado Adult Protective Services (CAPS) system before hiring, under C.R.S. 26-3.1-111, to determine whether the applicant has been involved in a substantiated case of mistreatment.¹⁰

Real Estate Brokers

Applicants for a Colorado real estate broker license must submit fingerprints to the Colorado Bureau of Investigation for a state and federal criminal history check before they can submit the license application. Results go directly to the Real Estate Commission.¹¹

Trucking and Banking

Federal rules preempt state limits in some industries. Motor carriers must investigate each commercial driver’s safety performance history and driving record for the preceding three years, and must pull updated motor vehicle records annually.¹² Section 19 of the Federal Deposit Insurance Act prohibits insured depository institutions from employing anyone convicted of a crime involving dishonesty, breach of trust, or money laundering without prior written FDIC consent.¹³

Evaluating a Criminal Record Without Creating a Discrimination Claim

Even when you can legally consider criminal history, a blanket policy that rejects every applicant with a record creates serious disparate-impact exposure under Title VII. The EEOC’s enforcement guidance directs employers to weigh three factors drawn from Green v. Missouri Pacific Railroad for each applicant:

The nature and gravity of the offense
The time elapsed since the offense or completion of the sentence
The nature of the job being sought

The EEOC recommends an individualized assessment rather than automatic disqualification. Give the applicant a chance to explain the circumstances, show evidence of rehabilitation, and demonstrate why the conviction should not be disqualifying for the particular role.¹⁴

Colorado’s Anti-Discrimination Act also permits disparate-impact claims where background check practices disproportionately affect a protected class.

Social Media Screening

Reviewing a candidate’s social media is legal in most cases but creates risk employers often underestimate. A Facebook or LinkedIn profile can reveal race, age, religion, disability status, and national origin, all protected characteristics. Once you have seen that information, defending a later rejection becomes harder.

The EEOC has stated that personal information from social media may not be used to make employment decisions on prohibited bases. The agency recommends having a designated person who is not involved in the hiring decision conduct any social media review and relying only on publicly available information rather than requesting account passwords.¹⁵

How Long to Keep the Records

EEOC regulations require employers to retain personnel and employment records for at least one year. If an EEOC charge is filed against your company, you must keep records related to the charge until the case reaches final disposition, including any resulting lawsuit.¹⁶ That includes the background report itself, the applicant’s written consent, and any adverse action notices sent.

Penalties for Noncompliance

Violations carry penalties under both state and federal law, and they escalate for repeat offenders.

Chance to Compete Act

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

First violation: a warning and an order to comply within 30 days
Second violation: an order to comply within 30 days plus a fine of up to $1,000
Third or subsequent violation: an order to comply within 30 days plus a fine of up to $2,500

The first violation carries no financial penalty, giving employers one chance to fix the problem.¹

Credit Check Violations

An employee injured by a violation of the Employment Opportunity Act can file a complaint with the Division of Labor Standards and Statistics. After investigation and hearing, the division may award civil penalties of up to $2,500.¹⁷

FCRA Violations

The real financial exposure sits with the FCRA. A willful violation entitles the consumer to statutory damages between $100 and $1,000 per violation, or actual damages if higher. Courts may also award punitive damages and reasonable attorney’s fees.¹⁸ Because FCRA claims are frequently brought as class actions, a single procedural mistake applied across hundreds of applicants can generate substantial liability. The most common triggers are failing to provide a standalone disclosure and skipping the pre-adverse action notice.

1
FindLaw. Colorado Revised Statutes 8-2-130 – Criminal History Limits on Advertisements and Applications
2
Colorado Department of Labor and Employment. Colorado Chance to Compete Act FAQs
3
Justia. Colorado Code 24-72-703 – Sealing of Criminal Justice Records
4
Justia. Colorado Code 24-72-702 – Expungement of Arrest Records in Case of Mistaken Identity
5
Justia. Colorado Code 8-2-126 – Employer Use of Consumer Credit Information
6
Colorado Department of Labor and Employment. Colorado Employment Opportunity Act – INFO 9D
7
Office of the Law Revision Counsel. 15 USC 1681b – Permissible Purposes of Consumer Reports
8
Federal Trade Commission. Background Checks on Prospective Employees – Keep Required Disclosures Simple
9
Justia. Colorado Code 26-6-104 – Licenses – Out-of-State Notices and Consent
10
FindLaw. Colorado Code 26-3.1-111 – Access to CAPS
11
Justia. Colorado Code 12-10-203 – Application for License – Rules – Definition
12
eCFR. 49 CFR 391.23 – Investigation and Inquiries
13
Office of the Law Revision Counsel. 12 US Code 1829 – Penalty for Unauthorized Participation by Convicted Individual
14
U.S. Equal Employment Opportunity Commission. Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions
15
U.S. Equal Employment Opportunity Commission. Social Media Is Part of Today’s Workplace but Its Use May Raise Employment Discrimination Concerns
16
U.S. Equal Employment Opportunity Commission. Recordkeeping Requirements
17
Colorado Department of Labor and Employment. Colorado Employment Opportunity Act 8-2-126 CRS
18
Office of the Law Revision Counsel. 15 US Code 1681n – Civil Liability for Willful Noncompliance