Preparing for the Equal Pay Act: What is a Safe Harbor, and How Can It Help You?

On January 1, 2021, the Equal Pay for Equal Work Act will take effect in Colorado, subjecting employers across the state to a host of new requirements and a new legal landscape. One aspect of the new law generating considerable attention is its Safe Harbor provision, which employers can use to limit their potential liability under the bill.

Under the law, employees can directly file a lawsuit against their employer, alleging wage discrimination. If the employee wins the lawsuit, the employer will have to pay liquidated damages equal to the amount of back pay owed, unless the employer can prove they made a good faith mistake. If the employer has performed a comprehensive pay audit within the last two years that attempts to identify and remedy pay disparities, that audit can serve as evidence of good faith. As this would eliminate the liquidated damages, it would effectively cut an employer’s potential liability on an equal pay claim in half.

To qualify for the safe harbor, the analysis needs to be a legitimate attempt to identify and correct pay disparities, and so in addition to limiting an employer’s potential cost in a lawsuit, it will also allow employers to identify and address their vulnerabilities before the courts get involved. In light of the enormous potential savings this represents, every Colorado employer should consider conducting a comprehensive pay audit before the law takes effect.

Employers Council offers a Pay Equity Analysis to members who wish to show evidence of their good faith and address any vulnerabilities. This analysis breaks down a workforce into groups of employees likely to be considered engaged in equal work under the law. There is then a statistical analysis that compares employee pay within those groups and identifies statistically significant disparities based on gender. All disparities identified are then analyzed to see whether any legal factors will excuse the disparity, and for those that cannot be legally justified, we recommend equity adjustments that are calculated to close the existing pay disparity. All of the above should be conducted under attorney supervision to maximize the protection the analysis receives.

All Colorado Employers Council members who are looking to take advantage of the new Safe Harbor, or who want to get a better idea of whether they are vulnerable under the new law, should explore a pay equity analysis. Contact Employers Council at (303) 223-5306 or PayEquity@employerscouncil.org today to learn more.