Denver Business Journal let attorney for business interests inaccurately describe labor-backed measure

Summary: A Denver Business Journal article about the Initiative 73 proposed for Colorado's November ballot failed to challenge the assertion of an attorney for "local business groups" that the labor-backed measure "potentially could make every employee in an organization liable." The article omitted that the language of the initiative, which would address criminal liability for employees of businesses engaged in illegal conduct, specifically states that potential liability would fall only to "executive official[s]" or those with "comparable authority" in the business.

In a March 24 article about business- and labor-related initiatives being promoted for the state's November ballot, the weekly Denver Business Journal uncritically reported the assertion of an attorney representing "local business groups" that the proposed Initiative 73, to enact a law addressing criminal liability for individual employees of businesses engaged in illegal conduct, "potentially could make every employee in an organization liable." However, the article (an online version appeared March 21) omitted that the language of the proposed statute specifically would impose such potential liability on "executive official[s]", which it defines as "any natural person who is an officer, director, managing partner, managing member, or sole proprietor of a business entity," and on "agent[s]" of the business who have "comparable authority."

From the March 24 article by reporter Bob Mook in the Denver Business Journal (accessed through the Nexis database), headlined "Business, unions prepare for initiative battles":

Colorado businesses could spend millions of dollars campaigning against proposed ballot initiatives that -- if voters approve in November -- would devastate the state's employment environment, business leaders say.

A coalition of labor unions backs a handful of measures intended to crack down on corporate fraud, require employers to provide health care insurance and bar companies from firing workers without notice or reasonable cause.

Mike Cerbo, executive director of the Colorado AFL-CIO, said unions support the initiatives, and are prepared to back signature-gathering efforts to get the issues on the November ballot as well as provide campaign funds.

"These initiatives are looked upon highly by working families," Cerbo said.

He denied speculation from political observers that union support of anti-business amendments is really an attempt to siphon off campaign money from businesses for a proposed "right-to-work" amendment that would severely curb union power to collect dues from employees in union workplaces.

[...]

Doug Friednash, a Denver attorney retained by local business groups, said a proposed initiative that would let individuals sue companies and executives for "criminal conduct," potentially could make every employee in an organization liable.

"Every lawyer in town will need speed dial," Friednash said. "You could sue anyone based on what you read in the papers."

Contrary to Friednash's assertion that "every employee in an organization" would be potentially liable if the initiative passed, the Initiative 73 ballot title and submission clause approved on March 19 by the state's Initiative Title Setting Review Board read:

Shall there be an amendment to the Colorado Revised Statutes concerning liability for criminal conduct by business entities, and, in connection therewith, extending the criminal liability of a business entity to its executive officials for the entity's failure to perform a specific duty imposed by law; conditioning an executive official's liability upon his or her knowledge of the duty imposed by law and of the business entity's failure to perform such duty; allowing a Colorado resident to bring an action for civil damages against a business entity or executive official for such criminal conduct; allowing an award of damages in the civil action to the governmental entity that imposed the specific duty on the business entity; permitting an individual who brings a successful civil action to be awarded attorney fees and costs; and allowing an executive official who discloses to the attorney general all facts known to the official concerning a business's criminal conduct to use that disclosure as an affirmative defense to criminal or civil charges? [emphases added]

According to a March 20 Rocky Mountain News article, the language in the ballot issue was approved by the Title Setting Review Board after supporters revised it to be more specific than that submitted originally:

The corporate-crime measure extends penalties to employees who fail to stop it from occurring in their workplace. It also allows any Colorado resident to sue a company or its employees for fraud, with the proceeds going to the government.

The measure was intended to apply to executives, but the title board said the language made it apply to all employees. So backers came back with a proposal that limited it to executives.

However, while the Business Journal article reported Friednash's statement that under the initiative "you could sue anyone," the proposed statutory amendment language noted by the Colorado Legislative Council specifically defined who would be liable under the proposed new law:

SECTION 1. Section 18-1-606, Colorado Revised Statutes, is amended to read:

18-1-606. Criminal liability of business entities Liability for criminal conduct by businesses. [emphasis in original]

(1) A business entity is guilty of an offense if:

(a) The conduct constituting the offense consists of an omission to discharge a specific duty of affirmative performance imposed on the business entity by law; or

(b) The conduct constituting the offense is engaged in, authorized, solicited, requested, commanded, or knowingly tolerated by the governing body or individual authorized to manage the affairs of the business entity or by a executive official acting within the scope of his or her employment or in behalf of the business entity.

(1.5) AN EXECUTIVE OFFICIAL IS GUILTY OF AN OFFENSE IF THE CONDUCT CONSTITUTING THE OFFENSE CONSISTS OF AN OMISSION TO DISCHARGE A SPECIFIC DUTY OF AFFIRMATIVE PERFORMANCE IMPOSED ON THE BUSINESS ENTITY BY LAW AND THE EXECUTIVE OFFICIAL KNEW OR REASONABLY SHOULD HAVE KNOWN OF THE SPECIFIC DUTY TO BE PERFORMED. [emphasis added]

(2) As used in this section:

(a) "Agent" means any director, officer, or employee of a business entity, or any other person who is authorized to act in behalf of the business entity, and "executive official" means an officer of a business entity or any other agent in a position of comparable authority with respect to the formulation of the business entity's policy or the supervision in a managerial capacity of subordinate employees.

(a.5) "EXECUTIVE OFFICIAL" MEANS ANY NATURAL PERSON WHO IS AN OFFICER, DIRECTOR, MANAGING PARTNER, MANAGING MEMBER, OR SOLE PROPRIETOR OF A BUSINESS ENTITY. [emphasis added]

—B.J.M.