Colorado’s New “Equal Pay For Equal Work Act” Creates Significant New Obligations For Employers
On May 22, 2019, Governor Jared Polis signed the “Equal Pay For Equal Work Act” (SB 19-085), which will make Colorado one of the strictest states in the country when it comes to pay equity regulations. The Act created a new private right of action for employees to sue their employers in state court for gender-related pay discrimination. The Act also created a host of new obligations that will apply to all employers with employees in Colorado, including: (1) new requirements concerning job posting and advertising, (2) new standards for ensuring employees are paid fairly, (3) prohibitions on requesting or using information about applicants’ prior pay rates, and (4) prohibitions on disciplining employees for discussing compensation.
The good news is that companies have time to prepare for the new rules – the new law doesn’t go into effect until January 1, 2021. But there is a lot to do get ready! Significantly, the Act also provides an incentive for companies to conduct proactive pay analyses, providing a “safe harbor” from certain damages in future lawsuits if a reasonable self-audit has recently been undertaken.
The following is a summary of what companies need to know now to get ready for the new Colorado Equal Pay For Equal Work Act.
New Notice Requirements Concerning Job Postings
The Equal Pay for Equal Work Act creates two new notice requirements for Colorado employers, which are not found in any other state equal pay law:
- Employers must make reasonable efforts to announce, post, or make known all opportunities for promotion to all current employees on the same calendar day.
- Employers must disclose in each posting for each job opening the hourly or salary compensation, or a range of the hourly or salary compensation, and a general description of all benefits and other compensation offered.
New Standards for Establishing Pay Discrimination
The new law protects against discrimination based of sex (including gender identity) or sex in combination with another protected status. Employers may not pay an employee of one sex less than an employee of another sex for “substantially similar” work (measured as a composite of skill, effort, and responsibility).
This is a much broader standard than what appears in Federal law, which prohibits pay discrimination between employees doing “similarly situated work.” The difference will make it easier for employees in Colorado to establish pay discrimination, and more difficult for employers to ensure all employees are paid equitably. For example, under Federal law standards, a Housekeeper may only be able to compare her pay to other Housekeepers. But under the new Colorado standard (which is the same language as used in California and New Jersey), that Housekeeper may now also be able to compare herself to Janitors and/or Maintenance Workers.
Under the new Colorado standard, all an employee needs to do is establish that there is a pay difference between two employees of different sexes (including gender identity) doing substantially similar work. If an employee can do so, the legal burden shifts to the company to demonstrate that the pay difference is justified by a limited list of permissible:
- A seniority system;
- A merit system;
- A system that measures earning by quantity or quality of production;
- The geographic location where the work is performed;
- Education, training, or experience to the extent that they are reasonably related to the work in question; or
- Travel, if a regular and necessary condition of the work performed.
The new law creates a menu of options for employees to pursue claims, including a private right of action. Employees may also still avail themselves of administrative relief for pay discrimination claims through the Colorado Civil Rights Commission OR a mediation process yet to be developed by the Director of the Colorado Department of Labor and Employment.
A successful plaintiff may recover up to three years of back pay and liquidated (double) damages, unless the employer can show the “act or omission giving rise” to the pay violations was made in good faith.
Prohibitions on Pay History Information
Colorado joins eight other states (California, Connecticut, Delaware, Hawaii, Maine, Massachusetts, Oregon, Vermont, and Washington) with statewide salary history bans applicable to both public and private employers. According to the Bureau of Labor Statistics, the average woman made 80 percent of the average man’s earnings in the fourth quarter of 2018. At the current pace, the gender pay gap would not be eliminated until approximately 2060. However, many state and local governments have taken action to speed up progress by addressing the perceived causes of the pay gap, including prohibitions on requesting or relying on prior salary information during the hiring process. The theory is that setting starting pay rate based on prior salary may have the effect of perpetuating pay discrimination. For employers, that means there may be a need to revisit long-standing practices around pay-setting decisions.
Under the new Colorado law, employers may not:
(a) Seek/request the wage history of a prospective employee;
(b) Rely on the wage history of a prospective employee to determine a wage rate; or
(c) Discriminate or retaliate against a prospective employee for failing to disclose wage history.
Pay Transparency Requirements
Finally, the new Act prohibits employers from (1) preventing their employees from discussing their own compensation information with others and (2) requiring employees to sign a waiver that prohibits his or her ability to do the same.
Employers Have Time to Prepare
Colorado’s new law creates significant new risks and responsibilities for employers. While the new requirements do not take effect until January 1, 2021, Colorado employers should consider reviewing their pay policies and practices with employment counsel, under attorney-client privileged. Policies and practices to review should include:
- Practices regarding posting new openings. The new law requires including a wage rate or wage range with each new job opening along with a general description of other benefits and compensation offered.
- Practices for disseminating promotional opportunities. The new law requires reasonable efforts to inform all current employees of promotional opportunities on the same calendar day.
- Policies and practices surrounding compensation. Employers should review hiring practices and avoid asking questions about compensation history of an applicant and may no longer require employees sign a waiver that forbids the employee from discussing compensation information. The Colorado law does not forbid employers from asking applicants their salary expectations.
“Mini-Safe Harbor” For Proactive Pay Audits
The Equal Pay For Equal Work Act provides an incentive for employers to conduct proactive self-evaluations of their compensation practices. While not a complete defense against lawsuits, employers may use evidence of a “thorough and comprehensive pay audit” with the “specific goal of identifying and remedying unlawful pay disparities” to avoid an award for liquidated (double) damages.
Colorado employers should therefore consider conducting a proactive pay audit, preferably under attorney-client privilege, to take maximum advantage of the two-year “mini safe harbor.” Conducting an analysis will allow employers to identify and begin remedying any unexplained pay differences. Best of all, the audit may be used as evidence of “good faith” to minimize damages in any litigation under the Act.
For more information or assistance conducting proactive, attorney-client privileged reviews of compensation practices, please contact Jackson Lewis attorneys Peter Bulmer [email protected], Scott Pechaitis (303-876-2201 or [email protected]) and Melisa H. Panagakos (303-876-2203 or [email protected])
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