With all the surprises 2020 has brought so far, it’s difficult for anyone to think ahead to next year. But while HR departments are preoccupied with navigating all the changes the pandemic has forced on the workplace, employment lawyers say now is the time for employers to prepare for Colorado’s new pay equity law, which takes effect Jan. 1.
“It’s not too late to start,” said Jackson Lewis principal Laura Mitchell. “Come December, it will be too late to start thinking about implementation.”
Colorado’s Equal Pay for Equal Work Act was signed into law in May 2019. It prohibits employers from paying one employee less than another for “substantially similar work” based on sex or on the basis of sex plus another protected characteristic such as race, disability or age. It allows a worker to sue an employer for alleged pay discrimination, and they don’t need to file an administrative claim first before taking the matter to court. A worker may recover up to three years in back pay plus liquidated damages. The law also requires major changes in the recruitment process.
There’s a lot employers can be doing now to make sure they’re in compliance and have minimized the risk of employees filing a claim once the law goes into effect.
“Before COVID hit, many of my clients were preparing to conduct pay audits and take other measures to ensure compliance with this law and are starting now to resume those activities,” said Snell & Wilmer partner Elizabeth Wylie.
Employers have a lot to gain from conducting internal pay audits. An employer may be able to avoid paying liquidated damages under the EPEWA if they have completed an internal pay audit in the two years prior to an employee filing a pay discrimination lawsuit. The audit must have been performed with the aim of identifying and remedying unlawful pay disparities.
Pay audits allow employers to avoid future claims by correcting pay inequities before they become a liability, according to Wylie, and they can help boost employee morale. “It means a lot to employees when employers proactively examine the fairness of their compensation system,” she said.
Mitchell said that while the new law has spurred Colorado companies to complete pay equity audits, employers nationwide have been reviewing their compensation practices in recent years.
“We’re seeing it across the country because of what’s going on as a nation with some of these social justice movements, starting with the #MeToo movement,” she said. “So there is a lot of focus on pay just in general.”
The audits can be completed internally, Mitchell said, but big companies would benefit from hiring a statistician or outside firm to review pay on the basis of race and gender.
Smaller companies and employers that don’t want to hire a third-party auditor can look to the compliance and audit system for the federal Equal Pay Act as guidance for their own internal pay reviews, said Stephanie Loughner, co-chair of the employment group at Moye White.
“I think a great place to start is to look at audit manuals and see the questions that are being asked under the federal act,” she said, “and to try to translate those and find categories for your own [audits], because Colorado hasn’t developed those yet.”
If pay audits do uncover areas of concern, employers will want to act quickly, and transparently, to remedy any disparities, Loughner said, because if employees don’t feel their employer is taking the EPEWA seriously, it could prompt complaints.
“I’m suggesting to employers that they should really look into being more transparent on their pay scales and their pay salary bands,” she said, as well as any salary adjustments or promotions given as a result of the audits.
Mitchell recommended communicating any changes prompted by the audits in a way that is “consistent with the tone and tenor” of the organization. “You want to do the right thing as an employer, but you also don’t want to cause any additional risk or liability for yourself by doing a good deed,” she said, adding that depending on an employer’s circumstances and level of transparency, they might want to weave in pay bumps as part of regular merit increases or market adjustments.
The other thing employers can be doing to prepare for the EPEWA’s arrival is to review their job postings and job descriptions. Wylie said not as many employers have been taking this step, but having accurate and up-to-date job descriptions will be important for defending any claims brought under the new law.
“What often happens in these lawsuits is that workers try to compare themselves to people who are performing different jobs with a different set of responsibilities,” she said.
“And while titles may share common elements… the actual responsibilities they may be performing may be different. So having an accurate job description can be helpful in distinguishing in an objective way.”
The law prohibits employers from asking job applicants about pay history or relying on a prospective hire’s pay history to determine wages in the new position, so job listings and applications should be free of any requests to send salary history.
Employers will be required to let all current employees know of promotion opportunities on the same day. The information about promotion opportunities must be posted or announced before a hiring decision is made and must disclose the compensation or pay range for the position. “Although a lot of states are enacting pay equity laws,” Wylie said, “that internal posting requirement is what’s unique to the Colorado law.”
External job postings must also disclose the hourly pay or salary range for open positions as well as a description of other benefits.
According to the law, employers should keep records of job descriptions and pay history for each employee for the duration of employment plus the law’s statute of limitations of two years after the employee has left the organization.
The law does allow employers to justify pay differences if the entire difference is based on the following factors: a seniority system; a merit system; a system that measures earnings by quantity or quality of production; geographic location; relevant education, training or experience; and required travel.
Quantifying and documenting these “bona fide factors” will be key to defending any pay differentials. “Numbers tell the story. They are best to tell the story when it comes to trying to comply,” Loughner said. “So any time there’s a system or measurements or metrics, those should be documented, and then they should be monitored and managed.”
As for whether Colorado’s EPEWA will help fix the gender pay gap, Wylie, who has led salary negotiation workshops for professional women, said she thinks the added transparency about what colleagues are making could help women strike a better deal with their bosses.
“This isn’t going to solve pay inequities overnight,” she said. “But it does give employees some good tools in terms of negotiation leverage.”