Beginning 2021, Colorado’s Equal Pay for Equal Work Act Will Impose New Requirements on Employers’ Hiring, Promoting, and Record-Keeping Practices
Denver, Colo. (June 17, 2019) – On Wednesday, May 23, 2019, Colorado Governor Jared Polis signed into law Senate Bill 19 085, which imposes new, stringent obligations on Colorado employers as to hiring practices, promotion procedures, and record-keeping requirements. As a result, on January 1, 2021, these tightened wage laws will take effect to eliminate wage disparity across gender lines.
The General Assembly for the State of Colorado found that, despite both federal and state statutes prohibiting pay discrimination based on sex, female workers in Colorado (as of March, 2018) earn just 86 cents for every dollar that men earn. The wage gap was even more pronounced between Latinas and women of color and white men (53.5 cents and 63.1 cents to the dollar, respectively). The General Assembly further determined that eliminating the wage gap would result in working women earning, on average, $7,000 more per year, and between $400,000 and $1 million more over the course of a lifetime.
I. Prohibitions Under the Colorado Equal Pay for Equal Work Act
The Colorado Equal Pay for Equal Work Act (the “Act”) defines “employer” broadly to cover certain public entities and “every other person employing a person in the state.” The Act further identifies several prohibited practices and outlines multiple new obligations for employers.
First, the Act prohibits employers from discriminating between employees on the basis of sex, or on the basis of sex in combination with another protected status. In the Act, “sex” means an employee’s gender identity. No employer may pay an employee of one sex a wage rate less than the wage rate of an employee of a different sex for substantially similar work, regardless of a difference in job titles.
There are, however, several exceptions allowed. Wage-rate differentials may exist based on (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 that they are reasonably related to the work in question, and (6) regular travel that is a necessary condition of work performed. An employee’s previous wage rate history cannot be used to justify a disparity in current wage rates.
Second, the Act prohibits employers from (1) asking prospective employees their wage rate histories or relying on their wage rates to determine compensation, (2) discriminating or retaliating against any prospective employee for not disclosing his or her wage rate history, (3) discharging, or discriminating or retaliating against, any employee for invoking the Act on behalf of anyone or assisting in the Act’s enforcement, (4) issuing any adverse employment action against an employee or another person for asking about, discussing, or comparing his or her wage rate, (5) prohibiting an employee from disclosing his or her wage rate, or (6) requiring an employee to waive his or her rights under the Act to disclose wage rate information.
In summary, the Act prohibits all wage rate disparities between the sexes for performance of similar work, regardless of job title, except for the narrow exceptions outlined above. Additionally, the Act prohibits employers from engaging in certain activities that result, or can result, in the perpetuation of the wage gap and/or the cover up of wage rate disparities between sexes.
II. New Procedures for Resolving Claims
The Act establishes three avenues by which employees may pursue claims against employers for violations of the Act. Administrative options include availing oneself of any mediation process established and administered by the Director of the Division of Labor Standards and Statistics or filing a charge with the Colorado Civil Rights Division. An employee is not required to exhaust these administrative remedies and may instead opt to immediately commence a civil action by filing a claim in a Colorado district court.
An employee choosing to initiate a civil action must do so within two years from when the violation occurs. Under the Act, a violation occurs on each occasion that a person is affected by wage discrimination, and on each occasion that a discriminatory wage is paid.
III. Employer Liability: Remedies and Damages
A successful claimant may recover back pay for the entire duration of the violation up to three years. An employer found to have violated the Act is liable for economic damages in an amount equal to the difference between what the employee was paid and what the employee should have been paid but for any wage discrimination. An employer is further liable for additional “liquidated damages” (damages meant to compensate an employee for the delay in receiving amounts due as a result of a violation) equaling the economic damages, unless the employer can establish that the violation was in “good faith,” as defined in the following section.
Moreover, an employer found to have violated the Act is liable for various legal and equitable relief, including employment, reinstatement, promotion, pay increase, payment of lost wage rates, liquidated damages, and the employee’s or prospective employee’s reasonable litigation costs and attorneys fees.
IV. Good Faith Exception
An employer acts in “good faith” with respect to the violation when it has reasonable grounds for believing that its acts or omissions were not wage equity violations. While employers cannot escape liability for back pay owed to unlawfully underpaid employees performing similar job duties as their co-workers of the opposite sex, courts may not award additional liquidated damages if the employer proves that it acted or omitted to act in “good faith,” even when such actions or omissions constitute a violation.
Importantly, in determining whether the employer was acting in good faith, the court may consider evidence that the employer (within two years of the filing of the civil action) conducted a “thorough and comprehensive pay audit . . . with the specific goal of identifying and remedying unlawful pay disparities.” Consequently, performing such an audit can help mitigate any civil damages if a violation is found to have occurred.
V. New Transparency Requirements
The Act also imposes transparency obligations related to hiring, promoting, and record keeping. Regarding hiring, employers now must disclose in each job posting (1) the hourly or salary compensation, or the range of compensation, and (2) a general description of all the benefits and other compensation available to the prospective employee. Regarding promotions, employers now must alert all current employees (on the same calendar day and prior to making a promotion decision) to all opportunities for promotion. Employers must also make and retain records for each employee’s wage rate history and job descriptions for the entire duration of the employment, plus two years after the end of employment.
Employees or prospective employees seeking to pursue a claim for a violation of wage transparency must submit a complaint to the Director of the Division of Labor Standards and Statistics within one year after the date that the claimant learned of the violation. Each failure to comply with the promotional notice requirements constitutes one violation, and each failure to comply with the job opening notice requirements constitutes one violation regardless of how many job boards list the opening.
Should there be a finding that an employer did indeed violate the Act, an employer can receive a fine between $500 and $10,000 per violation.
VI. What this Means to Employers Moving Forward
The new Colorado Equal Pay for Equal Work Act contains new and important compliance obligations for employers, especially with regards to hiring practices, promotion procedures, and record-keeping requirements. Performing a thorough and comprehensive pay audit of your workforce with the specific goal of identifying and remedying unlawful pay disparities before the Act goes into effect may help to avoid allegations and damage awards against your business. Additionally, employers should establish records of each employee’s job description and wage rate to assist in both avoiding fines and demonstrating “good faith.”
Before January 1, 2021, the date that the Act becomes effective, consult with legal counsel regarding your company’s wage rate compliance. If you have any questions or concerns, or seek consultation on how to comply with the provisions of this Act, reach out to one of the Colorado offices of Lewis Brisbois Bisgaard & Smith, located in Denver or Colorado Springs.
Shawna Ruetz, Associate
Brian R. DeMocker, Summer Associate
Kayla D. Dreyer, Associate