Equal pay for equal work now law in Colorado: what it means for employers
Governor Polis recently signed into law SB 85, the Equal Pay for Equal Work Act. This law, which many in the business community opposed, seeks to narrow the significant pay disparity still in existence between men and women. For example, studies show that in general, women in Colorado earn just 86 cents for every dollar that men earn, often for the same work. This number is even lower for African-American women and Latina women. Closing the wage gap could increase women’s income by an average of $7,000 annually and lower the poverty rate for working single mothers.
The law prohibits paying women less than men for doing the same work. It also prohibits employers from asking applicants about prior salary history and creates more transparency in job postings. SB 85 does not take effect until January 1, 2021, but it is a good idea for all employers to be familiar with the changes, so that they can take steps to prepare.
What does the Equal Pay act require?
The act prohibits wage or salary discrimination on the basis of sex if a male employee and a female employee are doing “substantially similar” work, regardless of their job titles. There are some exceptions to this broad prohibition, however. An employer may pay a male employee more for doing the same work as a female employee if the employer can demonstrate that the difference is based on one of the following factors:
- Seniority system (such as in a union setting)
- Merit system
- Wages based on quantity or quality of production
- Geographic location where the work is done
- Education, training or experience, to the extent these are reasonably related to the work
- Travel, if travel is a regular and necessary condition of the work
It will be up to the employer to demonstrate that one of these factors accounts for a difference in pay between a male and female employer.
Employers may not use salary history to determinepay
Many employers ask, even demand of job applicants, information about their wage or salary history, and base pay in a job offer on that earlier income, rather than what they are paying people already in the organization doing the same work. This can perpetuate lower pay for women, who have traditionally earned a lower wage or salary and get locked in to that cycle.
Under the new law, employers may not ask prospective employees about their prior wage or salary history. In addition, even if they have that information, they may not use it to justify a difference in pay between men and women doing substantially similar work. Employers may not “discriminate or retaliate” against a prospective applicant for failing to discuss wage history, although that would be very difficult for a rejected job applicant to prove.
Disclosure of wage or salary information by an employee
It has also been a practice of some employers to forbid their employees from discussing, disclosing, or comparing wage information. SB 85 bans this practice, and also prohibits employers from
- retaliating, firing, or discriminating against an employee for asking about, disclosing or discussing the employee’s wage rate
- requiring an employee to sign any document prohibiting the employee from disclosing his or her wage or salary information or appears to deny their right to do so
Changes to enforcement and penalties raise risk for employers
SB 85 changes the process for employees to bring a claim, in ways that could raise the risk for employers. A person who believes that their employer or a prospective employer has violated one of these prohibitions may file a civil suit within two years of the alleged violation. They no longer have to go through the Colorado Civil Rights Division’s grievance process (although they may still do so).
The law allows back pay for the entire time that a violation occurred, up to a maximum of three years, plus liquidated damages in an amount equal to the employee’s economic damages. For example, if the court determines that a female employee was underpaid by $5,000 per year for three years compared to a male employee doing the same work, her economic damages are $15,000, plus an equal amount in liquidated damages. However, if the employer can show that the violation arose due to an action or omission in “good faith” and that the employer had “reasonable grounds” for believing it did not violate the law, the court may not award any liquidated damages. It will be up to the court to determine what is “good faith” and “reasonable grounds” in this context.
Business groups, including the National Federation of Independent Businesses, opposed this part of the bill. They wanted to keep the requirement that claimants go through the administrative process before filing in court. They feared that allowing claimants to file in court would lead to an increase in weak claims against small businesses, that would be time-consuming, costly, and result in higher insurance costs. However, the bill allows for this change, beginning in 2021.
Promotion and advancement opportunities
Finally, SB 85 requires employees to make reasonable efforts to announce or post all opportunities for promotion to all current employees, on the same day and prior to making any promotion decision. Each posting must also include an hourly wage rate or wage rate range. Presumably, this requirement is intended to prevent an employer from deciding on who gets a promotion and then going through the motions of posting the opportunity with no intention of considering other candidates. It also shows what the value of the job is, and allows all employees to compete for the position.
What businesses can do now to get ready
January 1, 2021 seems far off, but employers can take steps to get ready. The most important thing a company can do is review its pay practices, including all job categories, the employees in each category, and what they are earning. If male employees are earning more than females in the same category, the employer should determine if can justify the difference based on one of the permitted factors: seniority or merit system, pay based on quantity or quality of production, geographic location, education, training, experience (if related to the work), or travel. If the difference cannot be justified based on one of these factors, the employer may wish to consider closing the pay gap prior to January 1, 2021.
In addition, employers should stop asking applicants about their prior wage or salary history. While the prohibition against this does not take effect until 2021, continuing to ask for this information and then using it to determine the wage or salary of new employees may just increase the number of female employees earning less than males in the same job, for no justifiable reason.
If you have questions about the new Equal Pay for Equal Work Act, please contact Mark Spitz at mark@spitzlegalcounsel.com or 720-575-0440.