Newsflash: Pay Equity Law Goes Into Effect

December 1, 2020

By: Colin A. Walker

On January 1, 2021, Colorado’s new pay equity law will become effective. Like other new laws discussed in previous posts, this one is similar to laws in other states which are trending across the country. Colorado’s pay equity law has the following primary provisions:

  • Prohibits discrimination in compensation based on gender. Well, that’s no surprise. This is not an episode of “Mad Men.” The new law makes it easier for a plaintiff to prove an equal pay claim.
  • Prohibits inquiring about compensation history during recruiting. This is new and has been a point of concern for some recruiters. However, employers may ask about a candidate’s compensation requirements and can inform candidates of the range of compensation that the employer will pay. And, there is a good reason: inquiring about compensation history helps perpetuate pay disparities between similarly-situated men and women, which have existed for many years.
  • Here’s the big one: Employers must post or announce all “opportunities for promotion” to all employees before making a promotion decision. The announcement must be to all employees, not just qualified employees (though employers need not announce to employees entirely out of Colorado or for positions entirely outside of Colorado). The announcement must include the wage or salary rate (or a range), a general description of bonuses, commissions and other compensation, and a general description of all benefits. A “promotional opportunity” means the employer has or anticipates a “vacancy” in an existing or new position that could be considered a promotion for one or more employees in terms of compensation, benefits, status, duties, or opportunities for advancement. There is a narrow exemption for situations in which there is a compelling need for confidentiality.

In the world of C-Level executives, this could be a big change. Gone are the days of announcing the replacement of a retiring CFO with the assistant CFO whom you have been grooming for years. Before making the decision, employers will have to announce the position, pay range, and benefits as above. Since the employer has to announce compensation and benefits, all employees will be aware of the compensation of the highest-ranking C-Level Executives. 

Regulations providing additional detail will also go into effect on January 1, 2021. The new law is complicated and employers should review it carefully, consulting with competent employment law counsel, to ensure compliance.