United States: Colorado's Equal Pay For Equal Work Act: What Employers Need To Know Before 2021

On Wednesday, May 23, 2019, Colorado Governor Jared Polis signed into law Senate Bill 19‑085 (also known as the Colorado Equal Pay for Equal Work Act), which imposes new, stringent obligations on Colorado employers as to hiring practices, promotion procedures, and record-keeping requirements. Importantly, this new law becomes effective on January 1, 2021.

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.

I. Prohibitions Under the Colorado Equal Pay for Equal Work Act

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, though several exceptions are 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; or
  6. regular travel that is a necessary condition of work performed.

Importantly, 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.

II. New Procedures for Resolving Claims

The Act establishes three avenues by which employees may pursue claims against employers for violations of the Act:

  1. avail oneself of any mediation process established and administered by the Director of the Division of Labor Standards and Statistics;
  2. file a charge with the Colorado Civil Rights Division; or
  3. commence a civil action by filing a claim in a Colorado district court.

Note that an employee is not required to exhaust the first two administrative remedies and may instead proceed immediately to a civil action. However, an employee choosing to initiate a civil action must do so within two years from when the violation occurs.

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" (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."

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. New Transparency Requirements

The Act also imposes transparency obligations related to hiring, promoting, and record keeping. When hiring, employers now must disclose in each job posting both the hourly or salary compensation, or the range of compensation, and a general description of all the benefits and other compensation available to the prospective employee.

Employers must also now 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.

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

This 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 it has acted in "good faith."

For a more detailed explanation of this new law, read our legal alert from June 17.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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