Sweeping changes are coming soon to Colorado employers large and small.
On January 1, 2021, the Equal Pay for Equal Work Act will go into effect and when it does, employers in Colorado will be held financially accountable for sex-based pay discrimination.
It’s worth exploring the ins and outs of this new state law because it’s a game-changer for pay equity. And not only in Colorado. Other states are looking to it as a model to develop their own pay equity legislation. So let’s dive in.
What should companies do now to prepare for Colorado’s Equal Pay for Equal Work Act (it takes effect on January 1, 2021)?
Act now and act swiftly. The Equal Pay for Equal Work Act applies to all companies regardless of size and status—for-profit or non-profit, public or private.
On its face, the law:
a.) mandates companies to offer equal pay for equal work
b.) requires new record-keeping
c.) changes how employees interact and file claims
Only under a limited set of conditions can companies justify sex-based pay differentials. Here’s the list of exceptions:
- A seniority system
- A merit system
- A system that measures earnings by quantity or quality of production
- The geographic location where the work is performed
- Education, training, or experience reasonably related to the work in question
- Travel, if the travel is a regular and necessary condition of the work performed
(Noticeably missing from this list is salary history and market factors. That’s a win for gender pay equity.)
Outside of these exceptions, companies that pay their employees inequitably can be financially responsible under the law for non-compliance.
The law expands employee freedoms, too. Once enacted, employees who wish to process a pay inequity claim can go straight to the court to do so. Employees can also talk about their compensation freely with colleagues—and companies cannot retaliate.
These are the steps your company should start taking to prepare for January 2021:
1. Update job descriptions. Companies must keep records of job descriptions and wage history for all employees. They must save the records for two years after employee termination.
2. Adjust recruiting templates for job postings and interview guides to ensure they’re aligned with roles.
3. Centralize the wage decision-making process. Develop a well-defined compensation strategy to determine wages for promotions and new hires.
4. Review existing compensation policies to ensure they are equitable.
5. Conduct a pay equity analysis/audit to examine pay structure, uncover any discrepancies, and make necessary changes. The audit can also help limit liability by demonstrating good faith, i.e. that the employer is actively taking steps to self-evaluate and fix pay disparities.
6. Communicate the upcoming changes to employees, letting them know they are free to discuss wages amongst each other.
7. Provide training to compensation and hiring teams, managers, and others as needed.
Remember, every new hire added to the payrolls and every promotion or raise risks reopening gaps. That means eventually, your company will need to create an on-going, always-on process to keep pay gaps closed.