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Colorado’s Equal Pay for Equal Work Act: Prohibitions, Requirements, Penalties, and Allowable Actions

Author: Blaire Bayliss

Guest Editors: Sean McGah, Ashley Kaye

December 17, 2020 8:12am

Colorado employers, public and private, should prepare to comply with the Equal Pay for Equal Work Act (EPEWA), which will become law on January 1, 2021. The law, formerly Senate Bill SB19-085, contains significant regulations regarding salary requirements, job postings, allowable interview questions, and other aspects of employment. Due to the wide-ranging requirements and impacts of the EPEWA, even employers with equitable workplace practices should consider the requirements of the new law to ensure compliance.

Prohibited Actions

The EPEWA prohibits wage discrimination on the basis of sex. Enforcement of the act focuses on the substance of the job, rather than the job title, of each employee. Jobs requiring “substantially similar work” must pay the same rate. “Substantially similar work” is determined based primarily on skill, effort, and responsibility. If two job descriptions require identical skill, effort, and responsibilities in the business, but the jobs hold different titles, pay for the two jobs must be equal, or the business will be deemed in violation of the EPEWA.

The EPEWA also prohibits employers from seeking the wage rate history of a prospective employee or requiring disclosure of wage rate as a condition of employment. Relatedly, employers must not rely on a prior wage rate to determine a wage rate or taking retaliatory action against an employee for failing to disclose his or her wage history. Similarly, employers are prohibited from taking retaliatory action against employees for discussing their wages or wage rate. [1]

Required Actions

Colorado employers will be required to list the salary range for the position and a general description of the benefits and other compensation for the position. When job openings are listed internally, employers must make reasonable efforts to tell all employees about the opening on the same day. The employer must make reasonable efforts to make the job announcement prior to making a decision or promotion regarding the advancement opportunity. If an employer determines normal reasonable means may not be effective to communicate with each employee, the employer should take “reasonable alternative means” to communicate with these employees. If promotional opportunities are posted, the posting must be made in a conspicuous location, in each office or location where employees work. Colorado employers must provide postings in this manner for all jobs available to Colorado employees, including remote jobs and out-of-state jobs accepting Colorado applicants. [2]

Colorado employers will also be required to maintain records of job descriptions and wage rate history for each employee. These records must be kept for two years after employment ends. These records must be made available to the Colorado Department of Labor to assist the Department in determining whether there is a pattern of wage discrepancy.

The EPEWA applies to all Colorado employers, regardless of size, both public and private. The EPEWA does not directly address whether these requirements apply to third-party recruiters or headhunters. However, given the current phrasing of the law, employers may be responsible for violation of the EPEWA if the employer utilizes a third-party recruiter who fails to comply with the EPEWA. [3] Therefore, Colorado employers should take steps to ensure compliance by any third-party recruiters utilized by the business.

Penalties

If employers fail to comply with these required actions, steep penalties may result. A failure to comply with announcement and transparency requirements in pay and employment opportunities may result in fines between $500 and $10,000 per violation. Perhaps more importantly, failure to maintain records of job descriptions and wage rate history for each employee creates a rebuttable presumption, in a lawsuit alleging wage discrimination based on sex, that the records not maintained contained information favorable to the employee’s claim. [4]

This last penalty, creating a rebuttable presumption of plaintiff-friendly facts if records are not maintained according to the statute, creates a strong incentive to prevent businesses guilty of discrimination from engaging in spoliation of the evidence. However, it may create an even stronger incentive for non-discriminating companies to keep records. If records would tend to show non-discrimination, but are unavailable at the time of litigation within two years following an employee’s employment, the court and jury may (rebuttably) assume the facts the plaintiff alleges. This means non-discriminating employers may lose the ability to defend themselves in court. A loss in such a case may involve severe damages: a successful plaintiff may recover up to three years of back pay and liquidated damages. [5] For this reason, compliance with the EPEWA is essential, and employers should carefully keep and maintain records of job descriptions and wages. The EPEWA itself does not currently provide instructions as to how these penalties will be enforced, but this of course is no excuse for noncompliance.

Allowable Actions

Similar to the federal Equal Pay Act, employers may still provide different wages to different employees if the employer can show the pay differential is justified by legitimate factors unrelated to the sex of the employees. Legitimate factors employers can utilize to defeat a claim under Colorado’s Equal Pay Act include: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; (4) the geographic location where the work is performed; (5) education, training, or experience to the extent they are reasonably related to the work in question; or (6) travel, if it is a regular and necessary condition of the work performed.

Takeaway

Colorado employers should take steps to ensure compliance with the new law when it takes effect on January 1, 2021. Even Colorado employers with no history of wage discrimination should make changes, especially regarding recordkeeping and employment announcements, to ensure compliance. Colorado employers should conduct internal pay equity audits with the specific goal of identifying and remedying unlawful pay disparities, review and revise job descriptions and salary ranges as needed, and ensure all employee pay records are in order. [6] Inconsistent, outdated, or decentralized records, employment forms which request the applicant’s previous salary information, vague or undefined salary ranges for job postings, outdated job descriptions, and outdated pay policies may all pose a risk to employers under the new law. [7]

Colorado employers should also create or revise policies regarding job postings and recordkeeping to ensure managerial compliance with the EPEWA. [8] Colorado employers who may not be able to complete an internal pay audit before the EPEWA takes effect should still consider conducting such an audit: the law provides for a two-year “safe harbor” of sorts, during which time Colorado employers may be able to avoid the most stringent penalties for violation of the EPEWA through evidence of the audit. Further, evidence collected in the audit may be used to show any pay discrepancy was an error made in “good faith,” which may be used in the employer’s defense in the event of a lawsuit. [9] Colorado employers will be best served by training supervisors and hiring personnel regarding the EPEWA requirements and prohibitions, particularly if the employer has access to an attorney partial to the legal requirements. By taking these steps now, Colorado employers may avoid fines, litigation, and hefty jury verdicts. In addition to avoiding penalties and fines, Colorado employers should recognize this as an opportunity to promote equity and transparency within their businesses, which will promote equity and goodwill amongst employees in the workplace.

[1] https://leg.colorado.gov/sites/default/files/2019a_085_signed.pdf

[2] https://www.jdsupra.com/legalnews/colorado-employers-need-to-add-equal-96807/

[3] https://www.jdsupra.com/legalnews/faqs-colorado-s-new-equal-pay-rules-for-22082/

[4] https://leg.colorado.gov/sites/default/files/2019a_085_signed.pdf

[5] https://www.jacksonlewis.com/publication/colorado-enacts-comprehensive-equal-pay-law

[6] https://www.natlawreview.com/article/colorado-employers-prepare-to-comply-equal-pay-equal-work-act-taking-effect-january

[7] https://www.alvarezandmarsal.com/insights/colorado-equal-pay-equal-work-act-your-company-ready-2021

[8] https://www.rockymountainemployersblog.com/blog/2020/10/22/new-equal-pay-for-equal-work-act-takes-effect-in-colorado-on-january-1-2021

[9] https://www.jacksonlewis.com/publication/colorado-enacts-comprehensive-equal-pay-law

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