Tax Insights

Colorado Equal Pay for Equal Work Act: Is Your Company Ready for 2021?

Brennan Rittenhouse, Managing Director

brittenhouse@alvarezandmarsal.com

Emily Milligan, Senior Associate

May 26, 2020 / North America

Overview
With its recently enacted Equal Pay for Equal Work Act (the “Act”), Colorado is one of more than a dozen states taking action to protect employees against discrimination and ensure equal pay for equal work. Despite the presence of federal legislation, which has been mostly bark but no bite, recent studies continue to show a significant gender pay gap. As a result, state and local governments have begun passing their own legislation, which often includes inconsistent rules with varying degrees of protection for employees. Colorado’s pay equity legislation is among the nation’s most stringent, imposing notice requirements on employers in limiting the acceptable reasons for pay disparities, among other requirements. The law goes into effect January 1, 2021, at which time employers will be responsible for understanding and complying with these regulations.

Employers Subject to the Act
The Act applies to both private and public employers with any employees in Colorado, including government and religious entities. Unlike some previous legislation, there is no carveout for small businesses or household employers (e.g., households with employee childcare givers, housekeepers, etc.). Certain provisions, described in more detail below, impact job postings, which create some ambiguity as to whether the Act applies to employers with no current employees in Colorado, but may be looking to hire employees in the state.

Key Provisions
Pay Disparity
The Act’s primary purpose is to prohibit sex-based wage discrimination for “substantially similar work, regardless of job title, based on a composite of skill; effort…; and responsibility”. In other words, equal pay for equal work. Discrepancies may exist to the extent that employers can demonstrate that they are not based on wage history and are fully explainable by one or more of the following factors:

  • Seniority system
  • Merit system
  • System which measures earnings by quantity or quality of production
  • Location
  • Relevant education, training, or experience
  • Travel, if it is required by the work performed

Recently passed legislation in New York and California contain similar provisions that are designed to clarify the acceptable justifications for pay disparities, and to close the loopholes that previously existed under federal regulations.

Pay History
Many of the pay equity laws passed by other states contain more general provisions that ban employers from considering wage history when setting compensation rates for prospective employees. The intent of such legislation is to avoid inadvertently tainting current wage rate decisions by factoring in past wages, which may not have originally been set fairly. Similarly, the Act prohibits employers from requesting salary history from applicants, and employers may not retaliate against applicants who refuse to provide such information.

In contrast to the rules preventing employers from asking salary-related questions, the Act includes provisions that protect employees’ rights to discuss salary information with each other. Specifically, employers may not prevent employees from disclosing, discussing, or comparing salary information as a condition of employment, and employers may not require employees to sign a waiver for the same purpose. These rights were previously provided to certain employees under the National Labor Relations Act, but it contained various carveouts that are not present in the Colorado Act…

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