Colorado’s Equal Pay for Equal Work Act (the “Act") goes into effect January 1, 2021. To implement the Act, the Colorado Department of Labor and Employment recently adopted the Equal Pay Transparency (“EPT”) Rules. This Legal Alert summarizes certain notable features of the Act and the EPT Rules to help employers with Colorado employees ensure that hiring, promotion and pay practices are compliant.

The Act applies to all employers with one or more employees in Colorado, regardless of size. It prohibits employers from discriminating based on sex (or sex in combination with other protected status) by paying employees of different sexes differently for substantially similar work—regardless of job title. Under the Act, pay differences are permitted only if the employer can demonstrate that the entire difference is based on one or more of a number of specified reasons, including seniority and merit systems, geographic location, and education, training and experience to the extent the education, training or experience is reasonably related to the job in question.

Other significant provisions of the Act include:

• Salary History Ban: Employers cannot inquire about or rely upon salary history in order to determine pay.
• Good Faith Defense: An employer can establish a defense to liquidated damages (but not all liability) by showing that it acted in good faith. A sufficient pay audit conducted within the last two years may be considered evidence of good faith.
• Notices: The Act regulates communications about job openings via internal notices to current employees and job postings.
  • Notice of Promotional Opportunities: Employers are required to notify all current employees of promotional opportunities. The requirements of the notice depend on where the job is to be performed, as described in the summary of the EPT Rules below.
  • Job Postings: Employers are required to include in job postings the hourly or salary compensation and a general description of all benefits.

The EPT Rules clarify that the Act’s requirements relating to job postings and internal notices of promotional opportunities impose significant new responsibilities on Colorado employers.

• Promotional opportunities defined broadly: Promotional opportunities are defined broadly as “an existing or new position that could be considered a promotion for one or more employees in terms of compensation, benefits, status, duties, or access to further advancement.”
• Notice of promotional opportunities not limited to Colorado jobs: Employers are required to notify Colorado employees of all promotional opportunities, regardless of where the job is to be performed. In this respect, the EPT Rules walked back a provision in the proposed rules which would have required employers to provide notice to employees located outside of Colorado.
• Notice of promotional opportunities to be provided in writing to all employees on the same day: Employers must make reasonable efforts to provide written notice to all employees on the same day and prior to a promotional decision being made.
• Notification requirement not limited by qualifications: Further, employers may not limit notice of promotional opportunities to those employees who are qualified for the position. Instead, employers are required to provide notice of promotional opportunities to all employees, but may state that applications are open to only those with certain qualifications and may screen or reject candidates based on such qualifications.
• Geographic limits on compensation range disclosure requirement: Employers are not required to include a general description of compensation range and benefits for jobs that are not located in and cannot be performed in Colorado. For jobs that are located in Colorado or can be performed remotely, employers are required to include a general description of all compensation and benefits, including a salary or hourly wage range, in job postings and notices of promotional opportunities.
• Limited circumstances under which a promotional opportunity may be kept confidential: An employer is not required to post a promotional opportunity to all employees if the employer has a compelling need to keep a particular opening confidential because the position is still held by an incumbent employee. In such circumstance, if any employees are told of the opportunity, the EPT Rules impose more limited notification requirements.
• Posted compensation ranges: Posted compensation ranges must encompass the lowest to the highest pay an employer in good faith believes it might pay for a particular job. An employer may ultimately deviate from the posted range as long as the estimate is a good faith and reasonable estimate of the compensation possible at the time of the posting.

Employers with operations in Colorado should consult with legal counsel to ensure their practices are in compliance ahead of January 1, 2021.