Colorado’s New Equal Pay Law

Colorado has enacted a new Equal Pay for Equal Work Act (SB19-085), becoming the tenth state to pass pay equity laws that are more demanding than federal law.

The law will take effect on January 1, 2021. It shares many characteristics with other such state laws, including provisions on pay equity, pay history, and pay transparency. Colorado’s law also includes a unique requirement regarding promotional opportunities, as well as an incentive for employers to self-audit their compensation practices. This post will review the key provisions of the new law and discuss how employers can prepare for compliance.

Establishing Pay Discrimination

The law is primarily designed to guard against wage discrimination based on sex, as defined by an employee’s gender identity. An employer may not pay an employee of one sex less than an employee of another sex for substantially similar work as measured by skill, effort, and responsibility.

However, a difference in compensation is not considered discrimination if the employer can demonstrate that the difference is based on at least one of the following factors outlined in the Act:

• A seniority system;
• A merit system;
• A system that measures earnings 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 the travel is a regular and necessary condition of the work performed.

Pay History and Transparency

In addition to protecting against sex/gender discrimination, Colorado joins nine other states (California, Connecticut, Delaware, Hawaii, Maine, Massachusetts, Oregon, Vermont, and Washington) in establishing a statewide salary history ban. According to the law both public and private employers are prohibited from:

• Seeking the wage rate history of a prospective employee,
• Relying on a prior wage rate to determine a wage rate,
• Discriminating or retaliating against a prospective employee for failing to disclose the employee's wage rate history, and
• Discharging or retaliating against an employee for actions by an employee asserting the rights established by the bill against an employer.

Additionally, employers are not allowed to prevent employees from discussing their own wages; for example, they cannot require employees to sign a waiver stating they will not discuss compensation with coworkers.

Notice Requirements Unique to Colorado

The Equal Pay Act establishes two new requirements for Colorado employers that have not yet been enacted in any other state. First, employers must post or announce promotions or other employment advancement opportunities to all current employees on the same day. Second, when announcing new opportunities, employers must disclose the pay or pay range, and a description of all benefits offered with the position.

Proactive Pay Audits

Similar to equal pay laws in Massachusetts and Oregon, the Colorado Act provides an incentive for employers to proactively self-evaluate their compensation practices and policies. According to the Act, evidence of a “thorough and comprehensive audit” with the “specific goal of identifying and remedying unlawful pay disparities” may serve as a defense against lawsuits once the law goes into effect.

How to Prepare

The new law gives employees a very long list of claim options, including a private right of action in state court. A successful plaintiff can recover up to three years of back pay and liquidated (double) damages unless the employer can show it acted in good faith.

Employers have roughly 18 months to review compensation policies and practices before the Equal Pay Act goes into effect. Here are a few steps to take to start planning for compliance.

1. Conduct a proactive pay audit to take advantage of the protection in the Act. A self-evaluation is not a complete defense against lawsuits, but it will help to minimize potential damages.
2. Determine what will be needed to make job postings internally available to all employees at the same time. This may require legal and IT assistance.
3. Rescind any rules that prohibit employees from discussing pay.
4. Review hiring procedures and avoid asking questions about applicants’ pay history. Note that the law does not prohibit asking prospective employees’ expectations for compensation.

Organizations may wish to enlist legal assistance as they examine their hiring and compensation practices in anticipation of the new law taking effect. Taking the necessary steps before January 1, 2021 will minimize the risk of liability later.

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Featured Image by Rebecca Sidebotham.