On May 22, Colorado Gov. Jared Polis (D) signed the Equal Pay for Equal Work Act, which is one of the toughest pay equity laws in the United States. The law will take effect on January 1, 2021, and will apply to employers in the public and private sectors.
Under this new law, employers are prohibited from paying an employee of one sex a “wage rate” that is less than what is paid to an employee of a different sex for the same or substantially similar work, regardless of job titles. Employees who believe their employers violated the law are authorized to bring suit within two years of any violation.
The law’s prohibition against pay disparities contains a notable exception. Employers can avoid liability by demonstrating each of the following:
- That the disparity is 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, if reasonably related to the job; or (6) travel, if travel is a necessary part of the job.
- That any factors relied upon were applied reasonably.
- That any factors relied upon account for the entire wage rate disparity.
- And that prior wage rate history was not used to justify the pay disparity.
Where an employer is found to have violated the law, the employer will be liable for up to three years of back pay, representing the difference between what the employer actually paid the employee and what the employee would have earned absent discrimination. If the employer can establish that it acted in good faith and with a reasonable belief that it was not violating the law, the employer can avoid paying liquidated damages, which would otherwise double the back pay owed to the employee.
Under the law, an employer can establish that it acted in good faith by performing a comprehensive pay audit within its workforce in the two years before the filing of the lawsuit with the specific goal of identifying and rectifying pay disparities. Although this good-faith defense provides employers with an incentive to conduct pay audits, there is some concern that an audit could be used against the employer if the audit uncovers pay disparities based on factors that a court determines fall outside the statute’s exceptions, or if an employee brings suit under federal anti-discrimination laws – such as Title VII – instead of under the Colorado statute.
The Equal Pay for Equal Work Act contains a few additional requirements and prohibitions. For example, the law requires employers to make reasonable efforts to share promotion opportunities with all current employees on the same day, and before the employer makes a promotion decision. It also requires employers to disclose in every job posting the compensation and benefits offered for the position. The law prohibits questions about an employee’s or applicant’s salary history, as well as discrimination against an individual who refuses to disclose salary history. It is unlawful for employers to prohibit employees from discussing their pay, and to retaliate against or discipline employees who discuss pay.
Unless a referendum petition is filed, the Equal Pay for Equal Work Act will go into effect on January 1, 2021, roughly 19 months from now. We recommend that employers consult with legal counsel about their policies and procedures relating to hiring and setting employees’ salaries and pay rates. Employers should also provide training to employees who are involved in the interview and hiring processes. In light of the uncertainty surrounding the pay audits and their potential for being used against employers, employers would also be wise to seek legal advice regarding whether and how to conduct a pay audit under the good-faith provision of the Equal Pay for Equal Work Act.