Overview

In March 2019, Colorado enacted the Equal Pay for Equal Work Act (the “Act”) in an effort to combat gender-based pay disparities and promote pay transparency in the workplace. The Act established several new requirements for various pay practices and job postings, but was somewhat lacking in detail, leaving employers to make good-faith efforts to prepare for the Act in the absence of additional guidance.  For more information regarding the general requirements of the Act, please see our previous article, “Colorado Equal Pay for Equal Work Act: Is Your Company Ready for 2021?”.

In September 2020, the Colorado Department of Labor and Employment (“CDLE”) proposed Equal Pay Transparency Rules to clarify several provisions of the Act and lay out the process for employees to make claims.  The final Equal Pay Transparency Rules (“EPT Rules” or “Rules”) were issued on November 10, 2020, and include some significant clarifications, likely as a result of comments and pushback from employers and practitioners. Some of the most notable provisions of the EPT Rules include:

1. Contents of Job Postings
2. Posting Promotional Opportunities
3. Geographic Limitations
4. Complaint, Investigation, and Appeal Procedure

The EPT Rules provide additional detail to some previously ambiguous provisions, and in some cases provide more leeway for employers, though the requirements of the Act remain some of the most stringent in the country.  Each of the above significant provisions of the EPT Rules are summarized below.

Content of All Job Postings

The EPT Rules provide additional guidance regarding the compensation information to be included in job postings.  Job postings must include an hourly rate or salary (or range thereof) that the employer believes it will pay for the job posted.  The final compensation amount paid may ultimately differ from the posted range as long as the posted amount was determined in good faith.  The EPT Rules also require that postings must include information pertaining to any bonuses, commissions, or other forms of compensation, but clarify that the posting need not include specific amounts of such types of compensation.  Finally, the Rules provide additional details related to the benefits that should be described in job postings, which include “…health care benefits, retirement benefits, any benefits permitting paid days off (including sick leave, parental leave, and paid time off or vacation benefits), and any other benefits that must be reported for federal tax purposes, but not benefits in the form of minor perks.”

Postings Regarding Promotional Opportunities

The EPT Rules require that employers make reasonable efforts to announce or post promotional opportunities by ensuring that “all covered employees can access the posting or announcement within their regular workplace, either online or in hard copy, and are told where to find required postings or announcements.”  Such postings or announcements must contain the job title, compensation and benefits information as required for external job postings, and the method by which employees can apply for the position.

Based on the Promotional Opportunities provision, it is apparent that the CDLE heard and reacted to employers’ concerns when drafting the EPT Rules.  In our opinion, one of the most impactful changes in the EPT Rules is the definition of “Promotional Opportunities.”  This term was not defined in the Act, providing the potential for various interpretations and causing confusion about what was required.  The EPT Rules define a promotional opportunity as “existing 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) in terms of compensation, benefits, status, duties, or access to further advancement.”  In general, the posting requirement for promotional opportunities applies to any position that would be considered an advancement opportunity for any Colorado employee (including in-seat promotions).

Thankfully, the EPT Rules also provide for certain exceptions to the notification requirement, such as confidential opportunities in which the employer has not informed the incumbent employee that they are being terminated.  Other exceptions to the notification requirement found within the EPT Rules include temporary positions and certain automatic promotions that occur within one year of being hired.

Geographic Limitations

The EPT Rules provide a list of different potential employer situations related to geography and the job posting requirements for each scenario.  One of the more controversial provisions of the proposed EPT Rules mandated that multistate employers with only one employee in Colorado would still need to meet the posting and equal pay disclosure requirements for any postings made outside of Colorado.  However, after significant pushback during the comment period, this provision was not adopted in the final Rules. Under the final EPT Rules, the promotion posting requirements do not apply to employees outside of Colorado and the compensation posting requirements do not apply to jobs performed outside of Colorado or postings entirely outside of Colorado.  However, Colorado employees must still be informed of all promotional opportunities (whether the opportunity is in Colorado or not).

Complaint, Investigation, and Appeal Procedure

The EPT Rules set forth the process for employees to file complaints with the CDLE, including requirements for complaints submitted, information regarding the determination procedures, and various other details not originally included in the Act.  Additionally, the EPT Rules provide clarification on the period in which a claim may be brought.  Specifically, violations or claims occurring before January 1, 2021 will not be accepted by the Division of Labor Standards and Statistics. 

How to Prepare

The Act provides significant incentives to employers to prevent violations, the biggest incentive being the avoidance of steep penalties (potentially up to two times three years of back pay), by allowing employers who have previously conducted a pay equity audit to avoid paying liquidated damages.  Employers can work toward compliance in early 2021 by completing some of the following steps:

• Conduct a Pay Equity Analysis – Employers who have conducted a pay equity audit with the intention of identifying and correcting disparities within two years prior to a claim may be able to avoid paying liquidated damages (i.e., damages could be limited to one times three years of back pay, rather than two times).
• Conduct a Market Compensation Analysis – As of 2021, employee salary history may no longer be relied on to set wage rates.  A better practice is to determine the market range being paid for the position (factoring in location, years of service, etc.) and then set the wage rate accordingly.  Employers should assume that job postings, which will be required to include compensation ranges, will be seen by both current and prospective employees.  Compensation ranges that more closely align with the market are more likely to be viewed favorably by both groups.
• Update Relevant Documents – Job postings should be reviewed to ensure that they contain accurate and complete information required under the Act.  Similarly, job descriptions will need to be maintained for two years after employees terminate their employment, so it is important that employers review and, if necessary, update their processes to ensure that materials are properly retained.  Additionally, since employers will no longer be allowed to request salary history information from applicants, employers should review their recruiting and interviewing processes and documents to ensure such questions are removed from job application materials.
• Train Staff and Update Policies – In order to ensure everyone is prepared for the new regulations, employees should be trained on the relevant changes to Colorado’s law (e.g., supervisors may not prohibit employees from discussing compensation, and interviewers may not request salary history information).  Additionally, handbooks and official policies and process documents should be prepared, reviewed and/or updated to ensure consistency and compliance with the law.

Although the final EPT Rules provided much needed guidance and clarity around certain provisions, such as the promotional opportunity posting requirements and geographic limits, there are still quite a few uncertainties remaining for employers in Colorado.  The compensation experts at Alvarez & Marsal have extensive knowledge of the Colorado Equal Pay for Equal Work Act and the EPT Rules and can assist with any questions you may have.  Our team has assisted a number of clients with equal pay analyses, market compensation benchmarking analyses, reviewing job descriptions and postings, and preparing best practices for complying with the new legislation.