The Colorado Equal Pay for Equal Work Act (EPEWA), which officially went into effect on January 1, 2021, implements widespread compliance measures designed to address ongoing pay disparities in the workplace. The EPEWA will have an enormous impact in Colorado but its effects are not limited to businesses located in the state. The EPEWA applies to any company employing Colorado residents, making it paramount for national and global employers to be conscientious of the law’s extraterritorial effects that are exacerbated by the pandemic-driven rise in remote work. Accordingly, businesses across the country and abroad may find themselves overhauling workplace policies and compensation structures to meet EPEWA standards.

Both private and public employers must adhere to EPEWA mandates regarding compensation policies, job posting requirements, enhanced record-keeping procedures, and pay transparency. The EPEWA also incentivizes employers to regularly assess their internal compensation practices to address pay disparities. Failure to comply with the EPEWA can result in costly penalties and liquidated damages. 

EPEWA Prohibitions

Colorado joins a number of states adopting heightened equal pay laws across the country. Federal protections under the Equal Pay Act have long been criticized as ineffective because of loopholes under the provision permitting wage disparities based on any “factors other than sex,” and a lack of adequate remedies for equal pay violations. Colorado’s law is aimed at closing this loophole and outlines several prohibitions not included at the federal level:

No Wage Discrimination

Employers may not discriminate between employees on the basis of sex, or on the basis of sex in combination with another protected status, by paying an employee of one sex a wage rate less than the rate paid to an employee of a different sex for substantially similar work, regardless of job title. However, wage differentials are permitted if based on: seniority or merit systems; systems measuring quality or quantity of production; the geographic location where the work occurs; work that requires travel; or employees’ education, training, or experience, but only to the extent reasonably related to the work in question.

No Use of Pay History

Employers may not seek, or rely upon, a prospective employee’s wage history to determine wage rate. Discrimination or retaliation against a prospective employee for failing to disclose wage history is prohibited.

No Limitations on an Employee’s Ability to Disclose Wage

Employers may not require an employee to sign a waiver or other document that prohibits the employee from disclosing wage rate information or deny the employee the right to disclose the employee’s wage rate information. This includes workplace policies that forbid, discipline, or otherwise interfere with an employee for inquiring about, disclosing, or discussing the employee’s wage rate. It is unclear if the EPEWA will invalidate any such waivers signed before January 1, 2021, however, there is no statutory language indicating retroactivity.

Job Posting Requirements

The EPEWA requires that employers make reasonable efforts to inform all Colorado employees of any available promotional opportunities, including opportunities based outside of Colorado. While the job posting may list qualifications necessary to be considered for the position, all employees must be informed of the opportunity regardless of if the employer deems them unqualified.

Each job posting must include the job title; the hourly pay or salary, or a range thereof; a general description of all benefits and other compensation offered; and information on how to apply. Employers do not have to disclose compensation details for jobs based entirely outside of Colorado, but must disclose compensation information for remote jobs that may be performed in Colorado.

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Record-Keeping Requirements 

The EPEWA also increases the administrative burden on businesses. Beginning January 1, 2021, Employers must keep records of job descriptions and the wage rate history of every employee for the duration of employment plus two years after. If an EPEWA complaint is filed, the Colorado Department of Labor will review the records to determine if there is a pattern of wage discrepancy. If litigation ensues, failure to maintain records appropriately creates a rebuttable presumption that the records not maintained contained information favorable to the employee’s claim.

Enforcement, Penalties & Damages

There are multiple legal avenues for employees to bring claims under the EPEWA, including filing an administrative complaint with the Colorado Department of Labor and Employment or the Colorado Civil Rights Division, or bringing a civil lawsuit.

Colorado Department of Labor and Employment

A claimant filing an administrative complaint with the Colorado Department of Labor and Employment will engage in a mediation process. The Director of the Colorado Department of Labor and Employment is authorized to investigate any allegations and enforce actions against employers that are noncompliant with EPEWA pay transparency, notice, and record-keeping requirements. The Director may levy fines ranging from $500 to $10,000 per violation.

Colorado Civil Rights Division

Additionally, a claimant may file a charge with the Colorado Civil Rights Division for employment discrimination based on sex. Complaints of employment discrimination must be filed with the Division within six months after the alleged discriminatory or unfair employment practice occurred, after which the Division will conduct an investigation. While the Division is not authorized to impose monetary penalties, parties may have to participate in compulsory mediation in an effort to eliminate the discriminatory or unfair practice at issue.

Private Civil Action

Filing a complaint with the Colorado Department of Labor or Civil Rights Division does not prevent the ability to bring a private civil action as long as it is within two years of the alleged EPEWA violation. Parties to the action may demand a jury trial, which can result in considerable legal costs and risks. Employers may be liable for economic damages totaling the difference between the amount that the employer paid to the complaining employee and the amount that the employee would have received had there been no EPEWA violation. Further, aggrieved employees can seek legal and equitable relief, including reinstatement, promotion, pay increase, lost wages, up to three years of back pay, liquidated damages, and the employee’s reasonable costs and attorney’s fees. Liquidated damages may be awarded in the amount equal to the employee’s economic damages.

Proactive Pay Audit

Employers may avoid costly liquidated damages by demonstrating that the EPEWA violation occurred in good faith. In determining whether the employer’s error was in good faith, courts may consider evidence that the employer completed a thorough and comprehensive pay audit of their workforce, with the specific goal of identifying and remedying unlawful pay disparities, within two years of the filing of the EPEWA complaint. Employers should conduct, at a minimum, biennial pay equity audits and actively modify any policies causing pay disparity as part of their internal risk management practices.

Employer Considerations

Due to the expected increase in pay disparity lawsuits and administrative actions under the EPEWA, employers should assess their internal compensation, job posting, record-keeping, and job interview policies to ensure EPEWA compliance and avoid costly penalties. Moreover, employers must implement regular proactive pay audits aimed at pinpointing and addressing internal pay disparities in order to avail themselves of the EPEWA’s good faith protections.

The Department of Labor issued its Formal Opinion and Final Rules outlining EPEWA pay transparency and notice requirements. If you have any further questions about ensuring your employment practices are EPEWA compliant, we encourage you to contact The Rodman Law Group.

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