On May 22, 2019, Colorado passed a new pay equity law which brings the state to the cutting edge of regulation in this area.
The Act, which will take effect on January 1, 2021, prohibits discrimination because of sex (including gender identity) and provides that 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). The Act allows employers to avoid liability for pay disparities if they can show that the disparity results from:
- 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 a regular and necessary condition of the work performed.
So far, so good: in this regard, the Act is not significantly different from Title VII, the federal Equal Pay Act or the Colorado Anti-Discrimination Act.
But wait, there IS more …
The Act breaks new ground in a number of other ways. For example, the Act:
- Gives employees a variety of options to bring claims, including a private right of action in state court, using the administrative processes of the Colorado Civil Rights Commission or via a mediation process yet to be developed.
- Allows a successful plaintiff to recover up to three years of back pay and double (liquidated) damages, unless the employer can show it acted “in good faith.”
- Requires employers to “make reasonable efforts to announce, post, or make known all opportunities for promotion” to all current employees on the same calendar day (this requirement is unique among state pay equity laws)
- Requires employers to disclose in each job posting the pay or the pay range, as well as a general description of all benefits and other compensation.
- Prohibits employers from seeking a job candidate’s pay history and from considering the pay history of a candidate to determine starting pay (in this regard, Colorado joins a number of state and local governments which have passed salary history bans).
- Prohibits employers from having rules which prevent employees from discussing their pay (federal labor law, which applies to most private-sector employers of any size, already prohibits rules like this, but they remain surprisingly common).
- Incentivizes employers to conduct proactive self-evaluations of their pay practices; a self-evaluation is not a complete defense against lawsuits, but employers may use evidence of a “thorough and comprehensive pay audit” conducted with the “specific goal of identifying and remedying unlawful pay disparities” to avoid an award for liquidated (double) damages.
What Should Employers Do?
Although employers have the luxury of about 18 months’ lead time, I recommend that employers start planning for compliance now
- Consider a proactive pay equity audit to assess risk; initially, you can have in-house or outside counsel conduct a ‘preview audit’ under the attorney-client privilege to protect the confidentiality of your audit findings
- Determine what will be required to make job postings available to all employees at the same time (this may require IT and legal help)
- Examine your employee handbook; rescind any rules which prohibit employees from discussing pay
- If your hiring processes include questions to candidates about salary history, consider changing those processes ahead of the law’s effective date; brainstorm other data points you can use to set fair and competitive starting pay for new hires