Last year, the Colorado General Assembly passed legislation strengthening the state’s pay equity laws. Now the Colorado Department of Labor and Employment (CDLE) has issued final rules implementing the Equal Pay for Equal Work Act, which goes into effect January 1, 2021.
The Equal Pay for Equal Work Act prohibits Colorado employers from paying employees of different sexes differently for substantially similar work and provides limited factors to explain pay disparities based on sex. The entire differential must be explained by a seniority system, merit system, a system that measures earnings by quantity or quality of production, legitimate geographic location differences, or education, training, or experience related to the position in question. The Act also prohibits Colorado employers from asking job applicants about their prior salary history and may not base pay determinations on salary histories should they become known.
But the Act also requires employers to inform Colorado employees of promotional opportunities throughout the organization, and to provide pay and benefit information in postings for jobs to be performed in Colorado. Employers with operations in Colorado are scrambling to parse these new requirements.
Job Posting Pay and Benefit Requirements
The final rules require employers to “disclose in each posting for each job” the following information:
- The hourly rate, salary, or pay range the employer is offering for the position; and
- A description of all benefits and “other compensation” to be offered to successful applicants.
With regard to the advertised pay, the final rules note that employers may ultimately pay more or less than the posted amount or range, provided that what was posted was the employer’s “good-faith and reasonable estimate” of possible compensation at the time of posting. In other words, applicants are still free to negotiate their pay.
With regard to the description of benefits, the final rules require a “general description” of any bonuses, commissions, or other forms of compensation being offered, as well as a description of “all employment benefits” including (but not limited to):
- Health care;
- Leave (sick, parental, vacation, etc.); and
- Any other benefits that must be reported for federal tax purposes.
The final rules explicitly exclude benefits “in the form of minor perks” from the posting requirement, but does not elaborate or provide examples.
The job posting pay and benefit requirements do not apply to jobs to be performed entirely outside of Colorado, nor do they apply to postings entirely outside Colorado. The distinction between “jobs to be performed entirely outside of Colorado” and “postings entirely outside Colorado” is unclear.
Unfortunately, the final rules do not provide clarification here and do not appear to consider the complexity arising from remote work situations.
Whether or not the organization is a “Colorado employer,” defined to include the state and “every other person employing a person in the state,” does not appear to be a consideration, though there are clearly jurisdictional issues that would arise if the state attempted to enforce these provisions on organizations with no physical presence in the state.
Positions at physical work locations outside the state where the work does not involve travel to and work performed in Colorado would appear to be exempted, regardless of whether or not the employer could be considered a “Colorado employer.”
Jobs held by Colorado residents who commute out of state for work, such as employees who live near a state border and who live on the Colorado side, but work in one of the surrounding states (Wyoming, Nebraska, Kansas, Oklahoma, New Mexico, Arizona, or Utah) also appear to be exempted, again regardless of whether or not the employer has operations within the state. However, if such an employee does work for an organization with operations in Colorado, even if they do not work at a Colorado location, these provisions could be triggered if such an employee were allowed to perform work at home or could reasonably foreseeably use the employer’s Colorado facilities for any reason.
Employers with no facilities in Colorado but that nonetheless do business in Colorado may have reason to worry. Consider a consulting firm that advises Colorado organizations and might even send consultants to work temporarily at client sites within the state. It is unlikely that the state would have jurisdiction over such organizations sufficient to enforce these provisions, but they would be wise to seek the advice of legal counsel on that point.
Promotion Notification Requirements
Separate from the provisions regarding the content of job postings discussed above, the final rule requires employers to make “reasonable efforts” to “announce, post or otherwise make known all opportunities for promotion to all current employees on the same calendar day and prior to making a promotion decision.”
In other words, employees must be given advance notice of potential promotion opportunities, but only Colorado employees. The final rule exempts “employees entirely outside Colorado” from the promotion notice requirement altogether.
“Promotional opportunity” is defined as when an employer has or anticipates a vacancy in an existing or new position “that could be considered a promotion for one or more employee(s) [sic] in terms of compensation, benefits, status, duties, or access to further advancement.” Note, however, that employers are required to provide notice of such opportunities to all employees and may not limit the notice audience to employees deemed qualified. As a result, anything above an entry-level position is likely to qualify.
The required notices must be “in writing” and must include at least:
- Job title;
- Compensation and benefits information if applicable (discussed above); and
- How employees can apply for the position.
Past that, the form and format is up to the individual employer.
Note that notices of promotional opportunities do not need to include compensation and benefits information if the position is to be performed entirely outside Colorado or for “postings entirely outside Colorado.”
Administrative Headache with Potential Consequences
Understandably, employers that might have a “touch” inside the state of Colorado are concerned about the administrative logistical gymnastics posed by these final rules. The law is clearly intended to push employers to opt for broader solutions that incorporate internal and external transparency regarding pay and benefits for particular positions (typically considered confidential due to business competition concerns, among others) and internal advertising of open positions across the entire organization.
While the latter is likely an attractive option (why not inform the existing workforce of internal opportunities?), the former is unlikely to be an attractive option. Especially for larger, more complex organizations, determining whether or not a particular job posting must include pay and benefit information could very likely be a full-time job.
Often employers that make reasonable determinations in good faith are not harshly punished if they get it wrong. Typically they will be required to correct any deficiencies on a going-forward basis, but here it is unclear. Violations of these provisions appear to be subject to a fine of up to $100 per day that the employer violates the new rules. Whether that starts from the time CDLE determines a violation, or whether the fines can be retroactive (potentially as far back as the implementation date) is unclear.
To the extent that an organization is concerned about compliance with these provisions and does not intend to implement broader solutions, such organizations are well advised to seek legal counsel, specifically from firms with operations in Colorado that are likely to be more intimately familiar with the legislative background and intent, and more plugged-in to the CDLE and its enforcement processes. If you have questions, feel free to contact us at firstname.lastname@example.org.