Colorado tightened its protections for pay equity when the state’s Equal Pay for Equal Work Act (the “Act”) was signed into law on May 22. The Act, which will take effect on Jan. 1, 2021, provides protections more demanding than those of federal laws and results in changes that employers should immediately consider.

Background

The Act applies to all Colorado employers regardless of size and contains provisions regarding wage discrepancy, wage history, wage notice requirements and wage transparency in promotion and advancement opportunities. Notably, the Act also provides an applicant or an employee with a private right of action against an employer for alleged violations. This private right of action is in addition to the Colorado Division of Labor’s ability to enforce and investigate alleged violations of the Act on behalf of individuals, and it does not foreclose an applicant’s or an employee’s ability to seek relief from the Colorado Civil Rights Commission for pay discrimination.

Similar Pay for Similar Work

Under the Act, an employer may not “pay an employee of one sex a wage rate less than the rate paid to an employee of a different sex for substantially similar work.” Notably, an employee’s job title cannot be used as evidence of “substantially similar work.” If, however, an employer can show that the difference in wages is wholly due to (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; (4) geographic location; (5) education, training and experience; or (6) regular and required travel, an employer may defend against alleged violations. This analysis, typically resulting from an audit of the employer’s compensation scheme(s), will be fact specific.

S.B.19-085, 72d Gen. Assemb., Reg. Sess. (Colo. 2019), Colo. Rev. Stat. § 8-5-102(1)(a)–(c) (2019).

Compensation Discussions

Additionally, employers are prohibited from engaging in certain conduct regarding an employee’s pay information. Under the Act, an employer may not:

  • Ask about an applicant’s compensation history.
  • Use an applicant’s compensation history to inform current compensation decisions.
  • Prohibit employees from discussing compensation with each other.
  • Compel an employee to disclaim his or her ability to discuss compensation.
  • Retaliate in any way against an employee who refuses to share compensation history.
  • Retaliate against an employee who shares wage information with his or her fellow employees.

S.B.19-085, 72d Gen. Assemb., Reg. Sess. (Colo. 2019), Colo. Rev. Stat. §8-5-102(2)(a)–(f) (2019).

Employer Notice Requirements

The Act adds new employer notification requirements going forward. Employers must notify all employees of opportunities for promotion at the same time, and this notification must include a compensation range and a description of benefits. Employers are also required to keep records of wage information for each employee’s duration of employment, plus for two years after the employee’s separation from employment.

S.B.19-085, 72d Gen. Assemb., Reg. Sess. (Colo. 2019), Colo. Rev. Stat. §§ 8-5-201(1)–(2), 8-5-202 (2019).

Potential Employer Liability

Violation of the Act may result in significant fines of from $500 to $10,000 per violation. Employees who successfully sue under the Act are also entitled to the difference between their actual pay and the pay they were entitled to (as determined) and, under some circumstances, additional back pay. Moreover, when an employer is found to have acted in bad faith, it may be required to pay “liquidated damages,” which doubles the total amount of actual damages. An employer may be subject to this liability when it has not conducted a prior annual pay audit. Employees may also recover their attorneys’ fees and costs for having to file the lawsuit.

S.B.19-085, 72d Gen. Assemb., Reg. Sess. (Colo. 2019), Colo. Rev. Stat. §§ 8-5-103(1)–(5), 8-5-104, 8-5-203 (2019).

Employers’ Practical Response

Colorado employers should prepare now for the Act’s Jan. 1, 2021, implementation. Employers should review and revise, as needed, their policies and practices related to advancement and promotion opportunities, employee pay record-keeping, confidentiality regarding compensation/wages, and pay-related hiring procedures. Additionally, employers should consider completing annual pay audits to avoid increased liability under the new law. At a minimum, employers will be well served to conduct at least one proactive pay audit before the act’s implementation in order to determine the risk associated with their current compensation structure.*