Colorado’s Pay Transparency Law Survives Preliminary Injunction: Next Steps for Employers

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Colorado’s Equal Pay for Equal Work Act went into effect on January 1, 2021. The act creates significant compliance burdens for employers with even one employee in Colorado. In fact, the act is the only law in the United States to require employers to (1) post compensation and benefits information with each job posting for Colorado jobs and (2) internally post promotional opportunities to current Colorado employees on the same day and sufficiently in advance of promotion decisions.

These unprecedented posting requirements have come under challenge. In December 2020, the Rocky Mountain Association of Recruiters (RMAR) filed a lawsuit in the U.S. District Court for the District of Colorado against the Colorado Department of Labor and Employment (CDLE) alleging the law’s transparency requirements and associated regulations are unconstitutional. On May 27, 2021, the court denied RMAR’s request for a preliminary injunction to stop the CDLE from enforcing the law’s posting requirements. Specifically, the court held the requirements to post promotional opportunities and include compensation information in job posts do not violate the Dormant Commerce Clause or the First Amendment because they do not unduly burden interstate commerce or commercial speech.

Importantly, the court’s denial of injunctive relief was due to the record’s lack of evidence at this initial, prediscovery stage of litigation. RMAR could ultimately succeed in the lawsuit if the record is developed adequately with the types of specific evidence the court has identified as necessary for determining whether the law is unconstitutional. In the meantime, the law will remain in place, the CDLE is moving forward with enforcement actions, and all employers with a single employee in Colorado may want to review the act’s comprehensive requirements.

Below are answers to some frequently asked questions by employers of all sizes that are just starting out on their road to compliance with the act.

Question 1. Are employers required to post jobs externally?

Answer 1. No. The Colorado law does not create an external posting requirement.

Q2. If an employer elects to post a position externally, what compensation information must the employer include in the posting?

A2. If a job that could be performed in Colorado is posted externally, the state’s Equal Pay Transparency Rules require that the posting include the rate of compensation or a compensation range; a general description of bonuses, commissions, or other compensation; and a general description of all employment benefits offered for the position, including healthcare benefits, retirement benefits, paid time off, and any tax reportable benefits. The benefits may be listed in a linked document, as long as the link is clearly provided in the posting.

Q3. How much specificity is required for compensation? (For example, can employers just provide a minimum salary?)

A3. According to the Equal Pay Transparency Rules, the “posted compensation range may extend from the lowest to the highest pay the employer in good faith believes it might pay for the particular job” at the time of the posting. Listing only the minimum rate of pay would not comply with the law. An employer may ultimately pay more or less than the posted range. If an employer hires above or below the posted range, employers may want to ensure that they make that decision based on bona fide factors other than gender and the applicant’s prior salary history, such as experience, educating, training, or geographic location. Importantly, employers cannot seek salary history from job applicants, and if the employer learns of an applicant’s prior salary, the employer may not rely on that information to determine current pay.

Q4. Do the rules apply outside Colorado?

A4. It depends. With respect to the obligation to disclose compensation ranges, employers with at least one employee in Colorado are required to disclose compensation ranges for (1) Colorado jobs or (2) jobs that could be performed in Colorado. To avoid any ambiguity, employers may want to consider specifying in the posting whether a position can be performed in Colorado.

However, the obligation to provide Colorado employees with advance notice of promotional opportunities extends companywide. For example, if there is a vice president of human resources position available in Chicago, all Colorado employees (including entry-level employees and employees without experience in human resources) must first be provided notice and given the opportunity to apply for the Chicago opportunity. Employees outside Colorado need not be notified of promotional opportunities.

Q5. Does an employer have to post the compensation ranges for all “remote” or “flex” positions, even if the chance of hiring a person in Colorado is low?

A5. Yes. If a job could be performed in Colorado, and the employer elects to post the job externally, the Equal Pay for Equal Work Act is triggered.

Q6. Does the law require an employer to post promotional opportunities internally?

A6. Yes. “An employer is required to make ‘reasonable efforts’ to ‘announce, post, or otherwise make known all opportunities for promotion to all current employees [in Colorado] on the same calendar day and prior to making a promotion decision.’”

Q7. What is a “promotional opportunity”?

A7. The CDLE defines “promotional opportunity” broadly as “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.” Importantly, the term is not limited to positions for which a Colorado employee is qualified. Under the Equal Pay Transparency Rules, employers cannot unilaterally determine who receives advance notice of promotional opportunities—every Colorado employee must receive notice.

Q8. Do “career progressions” or “in-line promotions” count as promotional opportunities?

A8. Yes.

Q9. What information about promotional opportunities must be included?

A9. The Equal Pay Transparency Rules provide that the posting must include at least the “(A) job title, (B) compensation and benefits [only if the promotional opportunity is a Colorado job or could be a performed as a Colorado job], and (C) means by which employees may apply for the position.”

The Equal Pay for Equal Work Act requires the notice be given in a way that allows Colorado employees to apply for and be considered for a position. (For most employers, that means the notice would be provided by posting the opportunity.) Again, under the act, there is not an obligation to give notice to the public at large, so posting exclusively internally is permissible.

Q10. Would posting a promotional opportunity on an internal career site (where all business units’ employees have access) comply with the law?

A10. An employer must make “reasonable efforts” to notify Colorado employees of promotional opportunities. The Equal Pay Transparency Rules clarify that “reasonable efforts” may include the “employer’s regular and customary method of communicating with its employees.” The employer can provide advanced written notice to employees “of the location and/or means by which promotional opportunities will be announced.” This might include notifying employees of an internal career site.

Q11. Are there any exceptions to the requirement to the promotional opportunity notification requirement?

A11. Yes. The CDLE identifies three very narrow exceptions to the promotional posting requirements: (1) a need for confidentiality exists, as “the promotional opportunity is to replace an incumbent employee” and the incumbent is not aware that he or she is being separated; (2) there is an automatic consideration for promotion after a trial period within one year based on a written representation; and (3) the position is temporary, acting, or interim, lasting less than six months.

Q12. Can employees or applicants sue for violations of the pay transparency rules?

A12. The law does not provide for a private right of action related to the posting or pay transparency requirements, so employees and applicants may not directly file lawsuits to enforce the law’s provisions. However, they may file complaints with the CDLE, and the CDLE has full authority to investigate and institute enforcement actions.

Q13. What are the potential consequences of noncompliance with the act’s provisions?

A13. The law provides for fines of $500 to $10,000 per violation (i.e., per failure to disclose a compensation range for each covered job posting), and the CDLE may issue an order to an employer to comply with the law. The CDLE is moving full speed ahead with investigating potential noncompliance, and employers may want to stay abreast of their obligations under the law.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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