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Colorado’s 2023 Legislative Session: Part II - What Employers Need to Know about the POWR Act

Denver, Colo. (July 19, 2023) – In Part I of our Colorado Client Alert Series, we provided a brief overview of the recent legislative developments that impose significant new requirements on Colorado employers. In this second installment of our client alert series, we review the Protecting Opportunities and Workers’ Rights (POWR) Act (SB 23-172) in greater depth. The POWR Act expands employee workplace protections and imposes new compliance requirements on employers effective August 7, 2023. Of note, the POWR Act:

  • Eliminates the judicially created “severe or pervasive” standard of proof for harassment claims;
  • Limits the availability of an affirmative defense regularly used by employers when a supervisor engages in unlawful harassment;
  • Adds marital status as a specific protected class under Colorado’s Anti-Discrimination Act (CADA) and modifies the disability discrimination standard;
  • Imposes new restrictions on employment agreements that contain non-disclosure provisions; and
  • Adds new recordkeeping requirements related to personnel records and complaints of discriminatory or unfair employment practices.

New Harassment Definition with Lower Standard of Proof

Previously, CADA aligned with federal law and required conduct to be “severe or pervasive” to establish unlawful harassment. The POWR Act rejects this standard in favor of one which “prohibits unwelcome harassment.” The revised definition of “harassment” now encompasses “any unwelcome physical or verbal conduct or any written, pictorial, or visual communication” that is directed at an individual or group of individuals because of their actual or perceived membership in a protected class. The conduct or communication no longer needs to be “severe or pervasive.” Instead, it only needs to be “subjectively offensive” to the individual alleging harassment and “objectively offensive” to a reasonable person who is a member of the same protected class. The conduct or communication will constitute a discriminatory or unfair employment practice under CADA, if:

  • Submission to the conduct or communication is explicitly or implicitly made a term or condition of the individual’s employment;
  • Submission to, objection to, or rejection of the conduct or communication is used as a basis for employment decisions affecting the individual; or
  • The conduct or communication has the purpose or effect of unreasonably interfering with the individual’s work performance or creating an intimidating, hostile, or offensive working environment.

“Petty slights, minor annoyances, and lack of good manners” will not constitute actionable harassment unless the conduct or communication meets the new definition of harassment when taken “individually or in combination and under the totality of circumstances.” The POWR Act provides a variety of factors to consider when evaluating the totality of circumstances, including (1) the number of individuals involved in the conduct or communication, (2) the frequency, duration, location, type, and nature of the conduct or communications, (3) whether the conduct or communication is threatening, reflects stereotypes about a protected class, or involves the use of epithets, slurs or other humiliating or degrading communications, and (4) whether there was a power differential between the parties.

To address these changes, the POWR Act requires the Colorado Civil Rights Division (CCRD) to change charge intake forms to add “harassment” as a basis or description of the type of alleged discriminatory or unfair employment practice that is the subject of the charge. Given the new harassment definition and lower standard of proof, it will be far easier for plaintiffs to bring and prove actionable harassment claims. In addition to more charges being filed, more complaints likely will be filed in state court and employers will have greater difficulty obtaining dismissal of claims that are based on isolated comments. Colorado now joins California, Delaware, Maryland, New York, and Washington in deviating from the federal standard by either eliminating or weakening the “severe or pervasive” standard for harassment claims.

Limits on an Employer’s Affirmative Defense for Supervisor Harassment Claims

When an employee proves that a supervisor has engaged in unlawful harassment, the POWR Act now limits the availability of an employer’s affirmative defense to situations where the employer has an established program that is reasonably designed to prevent, deter, and protect employees from harassment in the workplace. An employer’s harassment prevention program satisfies the new requirements if the following conditions are met:

  • The employer takes prompt, reasonable action to investigate or address the alleged discriminatory or unfair employment practices;
  • The employer takes prompt, reasonable remedial action, when warranted, in response to complaints of discriminatory or unfair employment practices;
  • The employer has communicated the existence and details of the program to both supervisory and nonsupervisory employees; and
  • The employee has unreasonably failed to take advantage of the employer’s program.

Additional Protections for Marital Status

Previously, CADA made it a discriminatory or unfair employment practice to “discharge an employee or to refuse to hire a person solely on the basis that such employee or person is married to or plans to marry another employee of the employer.” CADA limited this provision to employers with more than 25 employees and carved out certain exceptions where marriage to a co-worker could present a conflict of interest (e.g., where one spouse would directly or indirectly supervise the other, audit moneys received or handled by the other spouse, or access confidential employer information like payroll or personnel records of the other spouse). The POWR Act adds failure to promote to the above list of prohibited employment actions.

The POWR Act also adds “marital status” to the list of protected classes in the employment context. Accordingly, the relationship or spousal status of an individual now receives broader protections under CADA (as opposed to just marriage to a co-worker). CADA defines marital status broadly to include “the relationship or a spousal status of an individual, including, but not limited to, being single, cohabitating, engaged, widowed, married, in a civil union, or legally separated, or a relationship or a spousal status of an individual who has had or is in the process of having a marriage or civil union dissolved or declared invalid.”

New Legal Standard for Failure to Accommodate Claims

The POWR Act eliminates the ability of an employer to assert that an individual’s disability poses a “significant impact on the job” as a basis for refusing to accommodate an otherwise qualified individual with a disability. Instead, the POWR Act now aligns with the federal standard under the Americans with Disabilities Act (ADA) and provides that an employer need not accommodate an individual with a disability if there is no reasonable accommodation that would allow the individual to satisfy the essential functions of the job.

Restrictions on the Use of Non-Disclosure and Non-Disparagement Provisions

The POWR Act imposes significant new restrictions on the use of non-disclosure and non-disparagement provisions in employment-related documents such as offer letters, employment agreements, restrictive covenant agreements, separation agreements, and settlement agreements. Specifically, the POWR Act voids any provision in an agreement that limits the ability of an employee or prospective employee to disclose or discuss, either orally or in writing, any alleged discriminatory or unfair employment practices (referred to as “Non-Disclosure Provisions”) unless all of the following conditions are met:

  • The Non-Disclosure Provision applies equally to all parties to the agreement;
  • The Non-Disclosure Provision expressly states that it does not restrain the employee or prospective employee from disclosing the underlying facts of any alleged discriminatory or unfair employment practice, including disclosing the existence and terms of a settlement agreement to certain enumerated advisors and family members, to any local, state, and federal government agency, or in response to legal process or any other purpose required by law;
  • The Non-Disclosure Provision expressly states that disclosure of the underlying facts of any alleged discriminatory or unfair employment practice does not constitute disparagement;
  • If an agreement contains a non-disparagement provision and the employer disparages the employee or prospective employee to a third party, the agreement must prohibit an employer from seeking to enforce the non-disparagement or non-disclosure provisions of the agreement or seeking damages against the employee or any other third-party to the agreement for their own violation(s);
  • Any liquidated damages provision in the agreement does not constitute a penalty or punishment and, to be enforced, the amount of liquidated damages must be: (1) reasonable and proportionate in light of the anticipated actual economic loss that a breach of the agreement would cause; (2) varied based on the nature or severity of the breach; and (3) not punitive.
  • The agreement must contain a separate addendum, signed by all parties to the agreement, which attests compliance with the foregoing conditions. The addendum must be attached to the agreement.

Employers that merely present non-compliant agreements to employees or prospective employees may incur liability for actual damages and a penalty of $5,000 per violation. The POWR Act also provides for a private right of action under which an employee or prospective employee may recover actual damages, reasonable costs, and attorneys’ fees. Evidence that an employer entered into one or more non-compliant agreements with other employees may support an award of punitive damages.

These requirements apply to non-disclosure agreements presented on or after August 7, 2023. Accordingly, employers must audit and update their template offer letters, employment agreements, restrictive covenant agreements, separation agreements, and settlement agreements to ensure compliance with these new requirements.

New Recordkeeping Requirements and Creation of Complaint Repository

In addition to the above provisions, the POWR Act also adds significant new recordkeeping requirements for employers. Effective August 7, 2023, employers must keep personnel or employment records for five years after the later of:

  • The date the employer made or received the record; or
  • The date of the personnel action to which the record pertains or of the final disposition of a charge of discrimination or related action.

For purposes of this provision, the POWR Act defines “personnel and employment records” broadly to include (1) requests for accommodations, (2) employee complaints of discriminatory or unfair employment practices (whether oral or written), (3) application forms submitted by applicants for employment, (4) other records related to hiring, promotion, demotion, transfer, layoff, termination, rates of pay or other terms of compensation, (5) selection for training or apprenticeship, and (6) records related to employees selected for training.

Additionally, employers are required to maintain an accurate, designated repository of all written or oral complaints of discriminatory or unfair employment practices that includes (1) the date of the complaint, (2) the identity of the complaining party (if the complaint was not made anonymously), (3) the identity of the alleged perpetrator, and (4) the substance of the complaint. Records in a designated repository are considered personnel records that are not subject to open public inspection. That being said, these records likely will be requested by CCRD during its investigation of any charge, as well as by plaintiffs in litigation.

The POWR Act does not specify penalties for an employer’s failure to maintain this repository. Existing CCRD rules provide, however, that an employer’s failure to provide requested information may create a rebuttable presumption that the requested information is harmful to the employer’s position. Accordingly, employers should review their documentation, recordkeeping, and records retention practices (particularly for documenting oral complaints) and work with counsel to develop the required complaint repository.

Key Takeaways

The POWR Act contains numerous provisions that increase liability risks for employers who fail to address these new requirements. Given the new definition of harassment, lower burden of proof, and mandated complaint repository, employers need to be proactive in their approach to harassment prevention. Before August 7, 2023, employers need to update employment agreements which contain non-disclosure provisions and should review and reassess the strength of their harassment prevention policies, practices, reporting mechanisms, and training.

Although not exhaustive, some best practices to consider include:

  • Developing robust harassment prevention policies with examples of inappropriate behavior (including online or social media activity);
  • Implementing and documenting annual harassment prevention training for all employees, with special sessions for supervisory personnel;
  • Requiring supervisors to report all inappropriate behavior that they observe, witness, or otherwise learn about to human resources and include compliance with harassment prevention best practices in performance evaluations;
  • Creating multiple avenues for employees to report inappropriate behavior, including, where appropriate, an anonymous hotline;
  • Developing and implementing procedures to respond to concerns about inappropriate conduct in a prompt, thorough, and objective manner;
  • Training those tasked with responding to concerns in workplace investigation best practices, including appropriate documentation of oral and written complaints to satisfy the repository requirements as well as any corresponding investigation and corrective action;
  • Imposing disciplinary action for inappropriate conduct or communications not just unlawful conduct;
  • Prohibiting retaliation against those that report, oppose, file complaints about, or participate in investigations or hearings related to, workplace harassment.

Up Next

For more information or compliance assistance with the POWR Act, please contact the authors or editors of this alert. Parts III and IV of our Colorado Client Alert Series will discuss recent amendments to Colorado’s Healthy Families and Workplaces Act and the Equal Pay for Equal Work Act.

Authors:

Diane L. Waters, Partner

Brandon P. Friede, Attorney

Editors:

Gregory Tumolo, Partner

Peter T. Shapiro, Partner

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