Colorado Governor Jared Polis signed the Equal Pay for Equal Work Act (Senate Bill 85) into law on May 22. The intent of the new law is to help close the gender pay gap in Colorado and ensure that employees with similar job duties are paid the same wage rate regardless of sex, or sex plus another protected status. Unless a referendum petition is filed, the law goes into effect on January 1, 2021, providing employers with 19 months to come into compliance. Key points of the legislation follow.
Prohibited Conduct and Scope
The Act prohibits employers from:
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paying differing wages based on an employee’s sex or on the basis of sex in combination with another protected status (disability, race, creed, color, sex, sexual orientation, religion, age, national origin, or ancestry) unless one of the statutory exceptions apply;
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seeking the wage rate history of a prospective employee or relying on a prior wage rate to determine a wage rate for the position in question;
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discriminating or retaliating against a prospective employee for failing to disclose their wage rate history;
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discharging or retaliating against an employee for asserting the rights established by the Act, invoking the Act’s protections on behalf of anyone, or in assisting in the enforcement of the Act;
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discharging, disciplining, discriminating against, coercing, intimidating, threatening, or interfering with an employee or other person because they inquired about, disclosed, compared, or otherwise discussed the employee’s wage rate; and
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prohibiting an employee from disclosing wage rate information.
The Act defines “employer” broadly to include “the state or any political subdivision, commission, department, institution, or school district thereof, and every other person employing a person in the state.” “Employee” is defined as “a person employed by an employer.”
Exceptions to the Act
The Act allows exceptions to the prohibition against a wage differential based on sex if the employer demonstrates the difference in wages is reasonably based upon one or more factors, including:
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a seniority system;
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a merit system;
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a system that measures earnings by quantity or quality of production;
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the geographic location where the work is performed;
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education, training, or experience to the extent that they are reasonably related to the work in question; or
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travel, if the travel is a regular and necessary condition of the work performed.
In relying on these factors, the employer must not rely on prior wage rate history to justify a disparity in current wage rates.
New Employer Obligations
The Act also imposes new affirmative obligations on employers. Once the Act is in effect, employers must:
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announce to all employees employment advancement opportunities and job openings, and the pay range for the openings; and
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maintain records of job descriptions and wage rate history for reach employee for the duration of their employment, plus two years.
Private Right of Action and Enforcement
Employees have a private right of action in district court to pursue remedies specified in the law. They need not first file administrative wage discrimination complaints with the Colorado Department of Labor and Employment before bringing suit.
The Act sets a two-year statute of limitations; a violation of the statute occurs each time a person is paid a discriminatory wage rate.
An employee may recover both economic damages (measured as the difference between the amount the employer paid and what the employee would have received had there been no violation) plus additional liquidated damages, equal to the amount of the economic damages. The liquidated damages provision is intended to compensate an employee for the delay in receiving amounts due. Employees may also recover attorneys’ fees and costs, and obtain legal and equitable relief, which may include reinstatement, promotion, and a pay increase.
The Director of the state Department of Labor and Employment is also authorized to enforce actions against an employer involving transparency in pay and employment opportunities, including fines of between $500 and $10,000 per violation. An employer’s failure to comply with the Act for one promotional opportunity or job opening is considered one violation.
Good Faith Defense and Wage Audits
An employer may avoid liquidated damages for a violation if it can establish that it had reasonable grounds for believing it was not in violation of the Act. The Act states that one factor to be considered in determining good faith is whether the employer had completed within the prior two years a “thorough and comprehensive pay audit of its workforce, with the specific goal of identifying and remedying unlawful pay disparities.”
Rebuttable Presumption Regarding the Failure to Keep Records
If an employer fails to keep required wage records and is later sued, the Act permits the court to impose a rebuttable presumption that the records not kept by the employer contained information favorable to the employee’s wage claim and the jury may be instructed that the failure to keep records is evidence that the violation was not in good faith.
Lessons for Employers
With pay equity issues increasingly in the news, we expect this new legislation to spur an uptick in litigation after it goes into effect in 2021. Because these are inherently fact-intensive cases, litigation involving the new Equal Pay for Equal Work Act will be complex and protracted. Colorado employers should audit and review their compensation systems now in order to identify and address potential problems. Consideration should be given to involving outside counsel in these audits in order to cloak them with the attorney-client privilege against public disclosure.
