September 30th, 2020

How to Prepare for Colorado’s New Equal Pay for Equal Work Act

Starting on January 1, 2021, a new law in Colorado—the Equal Pay for Equal Work Act—will go into effect. Each time a new law or regulation is passed, there are challenges to overcome to make sure you’re in compliance.

During a time of enormous change brought by the pandemic, yet another change in the form of a new law may feel overwhelming. Small businesses in particular can feel the pressure. But it’s important to prepare now so you can avoid the risk of lawsuits and other problems later.

Here’s a summary of the new law along with a practical guide for ensuring you’re in compliance.

What is the Equal Pay for Equal Work Act?

Passed in Colorado in 2019 but fully effective January 1, 2021, the Equal Pay for Equal Work Act prohibits all employers in the state, regardless of size, from discriminating based on sex and gender identity. The law requires pay equity, which is equal pay (including benefits) for substantially similar work.

Under the new law, employers are also required to:

  • Develop and implement compensation plans with no consideration to sex or gender identity
  • Make sure all employees have access to job descriptions, job postings, and promotion opportunities on the same business day
  • Disclose hourly wage or salary, benefits, and other compensation to all employees when posting jobs
  • Keep records of job descriptions and wage history for each employee for up to two years after termination
  • Provide a variety of options for an employee seeking financial relief for violations

Similar laws have passed in other states, but the specifics of those laws vary greatly. While the courts could interpret it differently, Colorado’s law closely mimics the law passed in California several years ago. Colorado’s law is both broad and deep in scope, and failure to comply can have a major financial impact. It could result in an employee being awarded up to three years of back pay, liquidated damages that effectively double the amount owed, and attorney and other legal fees. There are also steep fines for violating job posting and record-keeping requirements.

8 Actions to Take to Prepare for the New Law

There are several steps you can take now to help you prepare for the new law and generally update your best practices.

1. Develop a clear, written, objective compensation strategy that includes incentive programs.

2. Update job descriptions by reviewing and grouping similar work.

  • When posting job descriptions, consider asking employees to acknowledge receipt and that they understand them.
  • Update interviewing practices to make sure you’re following what’s allowed and what isn’t.

3. Use an HR management system to keep records of employee education, skills, licensing, training, certification, and any other information relevant to pay.

4. Conduct regular performance reviews to determine which employees’ pay may require a pay adjustment.

  • Be as objective as possible. Use SMART goals, which are Specific, Measurable, Attainable, Relevant, and Time-Based, to help remove the inherent subjectivity of performance reviews.
  • Consider bias training for managers and supervisors so they become aware of implicit bias and how to overcome it.
  • Ensure all supervisors and managers are using the same scoring system in the same way during performance reviews.

5. Define geographic distinctions or zones that may affect pay.

6. Do an initial detailed review of your pay practices and procedures.

  • Identify if you have current pay disparities and evaluate if the differences are allowable under the law.
  • If necessary, develop a remediation plan to rectify illegal disparities.

7. Perform regular, comprehensive pay audits to reduce or eliminate illegal pay disparity, and use a data-driven approach if feasible.

8. Consider using a third party like a full-service HR provider to help update your practices and processes and ensure you’re in compliance.

If you want to learn more, watch our on-demand webinar.

Getting the Help You Need

Businesses of all sizes face the challenge of keeping up with changing laws and regulations and making sure they stay compliant. Even in the best circumstances, it can take a lot of time and resources to comply with laws.

With the current upheaval caused by the pandemic, startup and small businesses operating with fewer resources need to be especially careful and methodical about meeting the standards of the Equal Pay for Equal Work law. Taking steps now to update your processes and record-keeping will go a long way toward ensuring compliance come January 1.

For more information about how you can prepare for the new law, contact Obsidian HR at (720) 456-3590 or [email protected].