UPDATE: The governor signed this bill into law on May 22, 2019.

In its recently concluded session, the Colorado General Assembly passed legislation to strengthen the state’s pay equity requirements, prohibit employers from seeking salary history from job applicants, and require employers to post internal job openings and list salary ranges on all postings.  The governor is expected to sign Senate Bill 19-085, the Equal Pay for Equal Work Act, into law this month.

Limited Factors May Be Used to Explain Pay Disparities Between Employees of Different Sexes Performing Substantially Similar Work

The bill prohibits Colorado employers from discriminating on the basis of sex (or sex in combination with another protected status) by paying employees of different sexes differently for substantially similar work—regardless of job title—based on a composite of skill; effort, which may include consideration of shift work; and responsibility.  However, pay differences are permitted if an employer can demonstrate that the entire 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 they are reasonably related to the work in question; or travel, if the travel is a regular and necessary condition of the work performed.  The law does not define the terms “seniority system” or “merit system.” Moreover, the employer must be able to demonstrate that it did not rely on prior salary history to justify a disparity in current pay.

Salary History Ban

When enacted, Colorado also will become the latest state to prohibit employers from seeking salary history from job applicants. If the employer learns of an applicant’s prior salary, the employer cannot rely on that information to determine current pay. 

No Administrative Prerequisite to Bringing Suit

An applicant or employee who believes an employer has violated any of these provisions of the bill may file a lawsuit within two years after an alleged violation occurs, with no requirement to go through an administrative process as a prerequisite to bringing suit.  However, an aggrieved individual may choose to file a charge with the Colorado Civil Rights Division, and the Colorado Department of Labor may create and administer a process to accept and mediate complaints and provide legal resources.  The legislation specifies that each time an employee receives a paycheck with a discriminatory wage rate, a new violation occurs for purposes of the two-year statute of limitations.  However, an aggrieved employee may obtain relief for a back-pay period not to exceed three years.  

Liquidated Damages Available, But May Be Avoided By Conducting a Proactive Pay Equity Analysis

Employers that violate the law’s provisions may be liable for the differential between what the employee was paid and what the employee would have been paid if there was no violation, plus an equal amount as liquidated damages.  However, an employer can avoid liquidated damages by demonstrating good faith and a reasonable grounds for believing it did not commit a violation.  In addition, in determining whether the employer’s violation was in good faith, consideration may be given to whether the employer, within two years prior to the lawsuit being filed, completed a thorough and comprehensive pay audit of its workforce, with the specific goal of identifying and remedying unlawful pay disparities.

Employers Must Announce Internal Openings and Include Salary Range in All Job Postings

In addition, part two of the legislation, entitled “Transparency in Pay and Opportunities for Promotion and Advancement,” will require significant changes to Colorado employers’ internal and external application processes.  For both internal and external job postings, Colorado employers will be required to list the salary range for the position and a general description of the benefits and other compensation for the position.  For internal openings, employers must make reasonable efforts to tell all employees about the opening on the same day, and prior to making a promotion decision.

Enhanced Record Retention Requirements, Including Job Descriptions

Although Colorado employers have no current obligation to prepare or use job descriptions, the bill will require employers to keep records of job descriptions and wage rate history of each employee for the duration of employment plus two years after the end of employment, in order for the Colorado Department of Labor to be able to determine if there is a pattern of wage discrepancy.

Employers May Be Fined or Receive an Adverse Inference at Trial

For the job-posting portion of the bill, aggrieved employees may file a written complaint with the Director of the Colorado DOL within one year of learning of the violation.  If the Director determines, after investigation, that that a violation occurred, the employer may be fined between $500 and $10,000 per violation.

In addition, if an employee who sues under the first part of the statute demonstrates a violation of the posting requirements in part two, the court may order “appropriate relief,” including a rebuttable presumption that any records the employer was required, but failed, to keep contained information favorable to employee’s claim, and a jury instruction that failure to keep records can be considered evidence that the violation was not made in good faith.

The law will take effect on January 1, 2021.

Colorado Employers Can Start Preparing Now

Colorado employers are now on notice of what factors may—and may not—be used to explain salary differences in their workforce for employees of different sexes performing substantially similar work.  The year and a half before the bill will take effect provides valuable opportunity for employers to conduct proactive pay equity audits of their workforces and correct any unexplained discrepancies.  In addition, employers will need to start preparing job descriptions, salary ranges for each position, and internal processes for publicizing promotional opportunities across the workforce.