As we reported in our blog post in June 2019, last year, Colorado started the process of tightening its protections for pay equity. The state’s Equal Pay for Equal Work Act (the Act), which was signed into law last year, takes effect on Jan. 1, 2021, and results in requirements that employers should immediately consider.

Background

The Act applies to all Colorado employers and contains provisions regarding pay equity. Under the Act, an employer may not “pay an employee of one sex a wage rate less than the rate paid to an employee of a different sex for substantially similar work.” Employers are also prohibited from requesting or using an applicant’s compensation history to determine salary. And employers are prohibited from retaliating against employees who share or refuse to share their compensation. Additionally, the Act requires employers to notify all employees of opportunities for promotions at the same time. Violation of the Act may result in significant fines, back pay and liquidated damages.

Employers should also keep in mind that federal equal pay laws are somewhat more employer friendly than Colorado’s Act. As such, even if an employer is in compliance with or has defenses to federal equal pay laws, it may still be in violation of Colorado’s Act.

State Trends for Equal Pay

Colorado is one of 49 states that have equal pay laws – Mississippi is the only state without one. With passage of the Act, Colorado joins 10 other states that have recently passed new and stronger laws trending toward pay transparency.

Employers must be mindful that Colorado’s statute is more stringent than most states’ (setting aside an employer-friendly jurisdiction like California) and is comparable to equal pay laws in states like Massachusetts, Oregon and Maryland, which have enhanced equal pay laws to include provisions on pay equity, pay history and pay transparency. Given the state-by-state trends toward stricter equal pay requirements, employers operating in and outside Colorado should take equal pay legislation seriously and act now to ensure they are in compliance with applicable law. Even in states where enhanced equal pay requirements are not the law, employers should take proactive measures to ensure they are in compliance with federal requirements and will not be surprised if the applicable jurisdiction passes enhanced equal pay requirements in the near future.

The same proactive approach holds true for state bans or restrictions on the use of an employee’s salary history. Currently, 19 states have salary history bans. Several of these states prohibit only government agencies from requesting or using applicant salary history to determine an employee’s wage. Colorado, California, Connecticut, Delaware, Hawaii, Maine, Maryland, Massachusetts, Oregon, Vermont and Washington go a step further, however, and make salary history bans/restrictions applicable to both public and private employers.

Conclusion

Colorado employers should prepare now for the Act’s Jan. 1, 2021, implementation. Employers should review and revise their policies and practices applicable to recruiting, hiring and setting wages/salaries. As part of this review, employers should also focus their attention on advancement and promotion opportunities, employee pay record keeping, compensation/wages confidentiality and pay-related hiring procedures. Additionally, employers should consider completing annual pay audits to avoid increased liability under the new law. At a minimum, employers will benefit from conducting at least one pay audit before the Act’s implementation to determine the risk associated with their current compensation structure and make necessary changes. Employers should also consider taking these steps at the direction and with the assistance of counsel so as to maintain confidentiality pursuant to the attorney-client privilege, where applicable.

Many thanks to Taylor Hill, office summer associate, for her assistance with research and drafting.