Pay Equity: Six Months Left, Are You Ready Colorado?

Employers are currently focused on one thing right now, COVID-19. Rightfully so, as this pandemic has changed so much of our everyday life. With our minds being preoccupied due to the current pandemic, it is easy to forget that Colorado’s Equal Pay for Equal Work Act, goes into effect in just six short months on January 1, 2021. There has not been an announced delay in the effective date due to the COVID-19 crisis. Now is the time to get everything in order from reviewing job descriptions to conducting a pay equity analysis. Below is information that can be used as a checklist to guide employers on the path to compliance.

Create/Update Job Descriptions – Now is the time to create job descriptions if they currently do not exist for all positions or update them for accuracy. Job descriptions will probably be the first defense an employer will use to show which positions are similar and, therefore, who can be compared for pay purposes. As a reminder, the Act defines equal as “substantially similar skill, effort, and responsibility.” No longer can we use working conditions in our comparison, which creates broader comparisons where more jobs will be looked at as similar. Do your job descriptions clarify who is comparable based on skill, effort, and responsibility? As a member of Employers Council, you have access to CCHAnswersNow Job Descriptions tool.

Review Job Posting Practices – The new law states, “An employer shall make reasonable efforts to announce, post, or otherwise make known all opportunities for promotion to all current employees on the same calendar day and before making a promotion decision”; and

“An employer shall disclose in each posting for each job opening the hourly or salary compensation, or a range of the hourly or salary compensation, and a general description of all the benefits and other compensation to be offered to the hired applicant.”

While there is uncertainty in what exactly is meant by some of the language in these statements, it appears the days of identifying someone for promotion without posting the job first is over. There is also a level of pay transparency built into the law with the requirement to disclose either the rate of pay or salary range in each posting. Make sure to review your current practices regarding internal and external job postings and modify them to comply with the new requirements. Employers Council has a sample job-posting template members can reference for compliance.

Update application and interviewing inquiry practices regarding salary –  As part of the Act, requiring salary history and using salary history to set a wage will be prohibited. Review your application and remove any reference to previous rates of pay. If the previous salary is part of the hiring questions from managers or recruiters, make sure to eliminate those questions from the interview process. It is okay to ask about wage expectations in the current role. The U. S. Supreme Court just last week turned down a review of a 9th Circuit Opinion stating that salary history shouldn’t be a “factor other than sex” that employers can raise as a defense under the Equal Pay Act.  The 9th Circuit covers Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon,  and Washington.  Other states also have laws against using salary history, and this prohibition is gaining ground.  Even if you are not in Colorado, this is something to strongly consider.

Create/Update a Formal Compensation System – Having a formal base pay system in place will act as a guide to stay compliant with the new law. How else will you explain pay differentials without a compensation plan? If you do not currently have a formal structure, it is time to think about creating one. If one exists, make sure it is not outdated. Review ranges and steps to make sure that jobs are in the correct job families based upon knowledge, skills, and abilities because you may have to justify why positions are within a given range. Employers Council’s Compensation Service can help with the creation or updating of base pay plans.

Review pay policies and practices – Understanding your pay practices is at the core of this law. Take the time to review your policies on setting pay for new hires, how you will allocate money for merit increases, determining increases for promotions, and any other pay policies you may have, including variable pay plans. Discrimination grows from inconsistency. Is the value of each factor for pay consistently applied? For example, is the same credit for experience being given for each applicant? Is one hiring manager giving more value in starting salary versus another? What about managers who have different philosophies when reviewing performance? Is the performance-based merit system subject to bias? What checks and balances do you have in place to prevent inequities that occur from allowing manager discretion from happening? What proof will you provide that you consistently applied your practice and processes? What if you had a prior practice of setting pay based on the previous salary? How are you going to remedy that now? Do you need to look at making adjustments? Our Compensation Checklist can help with this task.

Create a Strategy to Address Current Inequities – What information do you have to justify pay? Can you articulate the reason for a pay disparity? Do you have the data/records necessary to prove that wage differences are justified? Remember, there are only certain reasons allowed to justify differences in pay. They include seniority or merit systems, education, training, or experience, geographic location, the amount of travel, and systems that measure earnings by production quality or quantity. How do you confirm whether the entire wage difference is attributed to permissible factors? Are there performance evaluations to show better performance, applications/resumes to show more experience? If you do not have the backup to justify a pay disparity, create a plan for how you are going to address inequities. What will your budget be for equity adjustments? What communication will you provide to effected employees? How will you make sure inequities do not happen again?

Update Recordkeeping Practices – According to the Act, job descriptions and wage rate histories must be kept for the duration of employment plus two years. Review your recordkeeping practices to ensure compliance with the new retention period. This checklist provides general guidance about what types of records are appropriate and how to maintain them.

Consider Conducting a Pay Equity Analysis – The law instructs courts not to award liquidated damages when the employer can demonstrate that the Act or omission causing a pay disparity was in good faith. The employer reasonably believed it was not violating the law. One factor demonstrating good faith is whether the employer completed a “thorough and comprehensive pay audit of its workforce, with the specific goal of identifying and remedying unlawful pay practices” within two years before an employee commencing a lawsuit. If you are concerned about potential vulnerability to pay equity claims, we offer a comprehensive Pay Equity Analysis package that reviews your obligations under all relevant federal and state laws, provides a statistical analysis of your workforce and compensation, and advice on how to ensure you are compliant.

Create a Plan/Process to Monitor Pay Going Forward – A law like this is designed to motivate a cultural transformation that will push change on a company-wide basis going forward. Create a plan to monitor pay practices and decisions going forward. What processes will you implement to comply with this law and create a culture of pay equity as you move into the future?