In this Capitol Report:
The “Equal Pay for Equal Work Act”: What Does It Mean for Employers?
On May 22nd, Governor Jared Polis signed into law SB-85, the Equal Pay for Equal Work Act.”
What does this new law mean for employers? Below is a detailed explanation of the new law, with additional information that demonstrates how the Colorado Chamber and its business allies successfully sought to amend the introduced bill.
First, the Colorado Chamber supports “equal pay for equal work” as a general proposition.
The Introduced Bill
As introduced, SB-85 removed the administrative process of the Colorado Department of Labor and Employment for filing wage-discrimination complaints against employers.
Most significantly for employers, the introduced bill would have–for the first time–allowed workers to directly sue employers in district court. The Colorado Chamber has consistently objected to this provision as the sole remedy for workers because it would likely have opened the floodgates to lawsuits against employers, especially small firms that lack human-resource departments and expertise and experienced legal counsel. Defending against a lawsuit can be very costly for a small firm, which may be forced to settle out of court to mitigate the risk of going to trial and losing.
Last year, HB-1378, which died in the then Republican-controlled Senate, contained similar provisions that concerned the Colorado Chamber.
The Colorado Chamber lobbying team assembled a coalition of its members and business allies to address concerns with the first version of the bill as introduced. The coalition worked together and developed proposed changes which were shared with the proponents and sponsors.
Colorado Chamber lobbyists testified on the bill before the Senate Judiciary Committee and shared concerns with the introduced bill as well as provided comments on the amendments being offered in the Committee hearing.
Amending the Bill
Members of the Senate Judiciary Committee and Senate leadership responded to the coalition’s concerns and encouraged the successful adoption of various amendments, including the following:
- Changing the requirement for employers to maintain pay records from six years to three years;
- Striking language to address concerns about the need to re-post a job if an applicant negotiates outside of the posted pay range;
- Establishing that, if an employer has operated in good faith, a court should not have the discretion to award liquidated damages;
- Expanding the factors considered for pay differentials to include geographic location, education, training, experience and travel;
- Expanding the definition of “substantially similar work”;
- Clarifying that workers have the option of seeking a wage disparity claim through the Colorado Civil Rights Division; and
- Delaying implementation of the law from January 1, 2020, to January 1, 2021 to allow more time for compliance.
Additional amendments were adopted in the House, including:
- Establishing a process by the CDLE Labor Division to accept and mediate complaints by workers and provide them with legal resources regarding alleged violations; and
- Allowing into evidence before a district court that an employer had conducted a pay audit of its workforce to identify any pay disparities if conducted within two years prior to the date of a civil action.
Because the bill was amended to the satisfaction of the Colorado Chamber, it then moved to a “neutral position.”
The Purpose of the Act
The Act states:
An employer shall not discriminate between employees on the basis of sex, or on the basis of sex in combination with another protected status as described in Section 24-34-402 (1)(a), by paying an employee of one sex a wage rate less than the rate paid to an employee of a difference sex for substantially similar work, regardless of job title, based on a composite of skill; effort, which may include consideration of shift work; and responsibility, except where the employer demonstrates each of the following:
- That the wage differential is based on:
- A seniority system;
- A merit system;
- A system that measures earnings by quantity or quality of production;
- The geographic location where the work is performed;
- Education, training, or experience to the extent that they are reasonably related to the work in question; or
- Travel, if the travel is a regular and necessary condition of the work performed;
Here are more details on the major provisions of the new law that will affect employers:
Advertising Job Openings
An employer is required to post job openings internally and list the salary ranges for the jobs. The employer cannot, however, ask a job applicant about his or her salary history.
Avenues for Workers to Pursue Complaints
An aggrieved worker will face three options if she or he wants to pursue a gender-based, wage-complaint against an employer:
- File a complaint with the Colorado Civil Rights Division;
- File a complaint with the CDLE under an administrative process that the CDLE is authorized—but not required–to create; or
- File a lawsuit in district court.
It’s important for employers to understand that a worker is not required to pursue either or both of the first two options above before filing a lawsuit. Indeed, a worker could simply file the lawsuit and ignore the first two options.
The CDLE “Director is authorized to create and administer a process to accept and mediate complaints and to provide legal resources concerning alleged violations Section 8-5-102, and to promulgate rules as necessary for this purpose.” Some observers have pointed out that the Director will not be required to establish and administer the complaint process, just that the Director will have the authorization to do so.
The Act states that “Nothing in this section prevents an aggrieved person from filing a charge with the Colorado Civil Rights Division pursuant to Section 24-34-306.”
As noted, the Act creates the new provision that allows a worker to go to court. The worker is not required, however, to first proceed with the CDLE Labor Division and then the CCRD before filing a lawsuit.
If a worker goes to court, then he or she must do so “no later than two years after the violation occurs.”
A worker who has been discriminated against can recover back pay–known as economic damages–for a period of up to three years. The court can award additional economic damages equal to the amount of back pay owed–unless the employer can demonstrate that it acted in good faith (see below).
The introduced bill called for employers to be subject to liquidated damages even if they had acted in good faith.
The Colorado Chamber said it was unfair to require an employer who operated in good faith to pay liquidated damages. The bill sponsors agreed. If an employer can demonstrate to the court that it has operated in good faith, a court cannot award “liquidated damages” to a worker who goes to court under the new law.
The new law now defines the term this way:
7) “Liquidated damages” means damages to compensate an employee for the delay in receiving amounts due as a result of an employer’s violation of this Article 5. “Liquidated damages” does not constitute a penalty to the employer.
The law states:
If the employer demonstrates that the act of omission giving rise to the violation was in good faith and the employer had reasonable grounds for believing that the employer did not violate Section 8-5-102 (1), the court shall not award liquidated damages.”
The law also includes a provision that, if an employer undertakes a “thorough and comprehensive pay audit of its workforce, with the specific goal of identifying and remedying unlawful pay disparities” within two years prior to a worker filing a lawsuit, then that study will be taken as evidence by the court of the employer’s good faith.
Employers Council, with which the Colorado Chamber is mutually affiliated, has recently urged its members to contemplate undertaking a pay-equity analysis:
“A comprehensive Pay Equity Analysis can help an employer to identify their vulnerabilities under the law and address them now, and can potentially protect them from additional damages in the event of a lawsuit.”
Part 2 of the bill concerns “transparency in pay and opportunities for promotion and advancement,” which have been detailed in part above. Violations by employers of Part 2 carry fines that range from $500 to $10,000 per violation
Restrictions on Employers
The employer is prohibited for doing several things under the Act, including the following:
- Seeking the wage rate of a job applicant or relying on the applicant’s prior earnings history to determine a wage rate.
- Retaliating or discriminating against a prospective job applicant if he or she does not disclose prior wage-rate history.
- Terminating or retaliating against or discriminating against a worker who invokes enforcement of the Act.
Colorado Chamber members with questions about the Equal Pay Act should contact Loren Furman, Senior Vice President, State and Federal Relations, at 303.866.9642.
News Media Coverage
“What comes next for businesses as ‘equal pay for equal work’ becomes Colorado law,” by Ed Sealover, The Denver Business Journal, May 22nd.
“Colorado business leaders split on equal-pay measure headed to Gov. Polis’ desk,” by Ed Sealover, The Denver Business Journal, May 1st.
“Senate passes equal-pay measure that would enable Colorado Women to sue noncompliant employers,” by Ed Sealover, The Denver Business Journal, April 4th.
“Equal-pay measure advances at Colorado Capitol despite significant business concerns,” by Ed Sealover, The Denver Business Journal, February 21st.