The Impact of Colorado’s Equal Pay for Equal Work Act

It’s been over a year since Colorado’s Equal Pay for Equal Work Act was signed into law. The whole goal of the Equal Pay for Equal Work Act was to prevent wage discrimination, but has that been achieved? It’s hard to say. Lawmakers need more time to see the true impact of the law, but what we do know is that Colorado employers are still trying to make sense of the act’s requirements and avoid violations. 

Early Implications for Colorado’s Equal Pay for Equal Work Act

Soon after the Equal Pay for Equal Work Act went into effect, there was a lot of confusion among Colorado employers and even out-of-state employers. The cause of this confusion was driven by the wage transparency requirements. Businesses in Colorado or companies hiring Colorado employees have to list a wage range for jobs. This led many organizations outside of Colorado to exclude Coloradans from their remote jobs to avoid this requirement. 

While this action taken by other states eventually made national news—it has since died down. For one, out-of-state employers were violating the law by excluding applicants in Colorado. Secondly, many states are adopting comparable laws—so it might soon be common practice for employers across the country. After all, employees are more inclined to apply for a job if they know the salary. 

However, it’s still to be determined how the law will impact wage gaps. To help with the confusion that many Colorado employers are still working through when it comes to this Equal Pay for Equal Work Act, here is what it entails and the implications for your business. 

What Is the Equal Pay for Equal Work Act?

The Equal Pay for Equal Work Act went into effect on January 1st, 2021. In summary, the law requires Colorado businesses to provide equal pay–including benefits—to all employees performing substantially similar work. Specifically, the law required enhancements to job descriptions, job postings, and promotion opportunities. 

There are only six justifications for pay that employers can use to warrant pay differences. Together they must account for 100% of pay differentials: 

1. Seniority/Tenure: You are permitted to pay employees based on their length of service (or who have been with your company longer)
2. Merit-Based System: You can tie pay to a performance review system
3. Quantity or Quality-Based System: You can use a quantity-based system, but it must be based on bonuses or commissions of sales or the number of units employees produce, and a quality-based system must demonstrate low error rates, high customer satisfaction scores, etc.
4. Geographic Location: You can have differences in pay based on the geographic location of where the work is performed
5. Job-Related Education & Training: You are permitted to pay employees based on an employee’s experience, training, and education to the extent it is reasonably related to the employee’s job
6. Required Travel: You can justify a pay differential if you require an employee to travel away from home as a regular requirement

The actionable implications of the law provide employees with several options for seeking financial relief for violations. Employees can pursue administrative or civil proceedings for 2 years and be awarded 2X damages for up to 3 years of pay. So what else is required of employers? 

3 Implications of the Colorado Equal Pay for Equal Work Act for Colorado Businesses

Colorado’s Equal Pay for Equal Work Act has changed a lot for businesses hiring practices. Specifically, the law has changed the way employers post jobs, promotions, hire, determine pay, and keep records. 

1. Companies must update their job postings and promotions

Promotional opportunities must be announced to all current employees on the same business day and must be done prior to making the decision on the promotion. The exceptions for posting promotions include confidential searches and automatic promotions after a trial period. But ultimately, employers need to make sure their promotions are transparent as possible. 

On the other hand, job postings must include: 

• The offered pay or a range of pay
• A general description of any other compensation (bonus, commission, tips, etc.)
• A general description of the offered benefits

2. Hiring managers need to be careful through the job application process 

There are many questions you should avoid asking in an interview. But the Equal Pay for Equal Work Act adds to that list. Employers cannot ask applicants for information about their wage history. And if an applicant discloses this information, it can’t be used to determine the rate they are offered. Further, employees cannot be prevented from, or retaliated against, for disclosing their wage to another employee or outside the organization. 

3. Colorado employers must perform regular pay audits and keep records

Job descriptions and wage-related documents have to be kept for 2 years after an employee leaves a firm. Performing a thorough and comprehensive pay audit can help protect a business by reducing or eliminating illegal pay disparity. To avoid violations or issues with running your own pay audit, use a third-party organization to run it, and conduct the audit annually. 

As you can see, there is a lot to the Equal Pay for Equal Work Act. To help Colorado employers comply with the regulations, we’ve put together a list of best practices. 

Best Practices for Complying with the Colorado Equal Pay for Equal Work Act

To help comply with all the requirements of the Equal Pay for Equal Work Act, here are some best practices to get you started: 

• Develop a written compensation strategy
• Update any incentive programs to be written and as objective as possible
• Write clear and objective job descriptions—share them with employees and consider asking them to acknowledge receipt and understanding
• Use your HR Management system to record employee education, skills, and other info relevant to pay
• Perform a quarterly review to determine which employees may require a pay adjustment
• Perform regular pay audits with the aid of an outside party
• Update your HR management system to track information relevant to pay (i.e. education, prior experience, etc.)
• Complete an equal pay audit and develop a remediation plan for any findings
• Evaluate your job postings and promotion postings to ensure you are in compliance 

Please note, that if you think you are not in compliance with any of the requirements of Colorado’s Equal Pay for Equal Work Act or are facing violations, you should consult an employment attorney. Otherwise, Obsidian HR is here to help you with your HR compliance needs. We have experts on hand to help you craft your HR policies and strategies to comply with this law and many others. 

To learn more about the Equal Pay for Equal Work Act, watch this on-demand webinar. Or to learn about other laws and regulations impacting Colorado businesses, download the below.