Equal Pay: The Emerging Legal Landscape
Over the course of the past year, several states—including Colorado, Connecticut, and Rhode Island—have proposed and passed novel pay equity legislation. The impact of these laws is notable, including because they subject employers to significant notice requirements, which may require sweeping changes to workplace practices and policies. The impact of these laws is even more profound in the midst of the COVID-19 pandemic, due to the explosion of remote work opportunities resulting in more companies having multi-state footprints than ever before.
Colorado’s Equal Pay for Equal Work Act (effective January 1, 2021)
At a high level, Colorado’s Equal Pay for Equal Work Act (“EPEWA”) generally prohibits employers from paying an employee of one sex less than an employee of another sex for “substantially similar” work. Likewise, it sets forth various anti-discrimination obligations for employers, including that employers may not seek the wage history of any prospective employee, or rely upon wage history to determine the employee's wage rate.
One central purpose of the EPEWA is to lend transparency to opportunities for advancement in employment—and in doing so encourage female employees, who are statistically less likely to self-promote, to seek promotional opportunities. To that end, the EPEWA requires covered employers (i.e., those with at least one employee located in Colorado) to announce to employees who work at least partially in Colorado all “promotional opportunities” available in the state and provide the associated hourly or salary compensation (or compensation range) and general benefits for the positions. The EPEWA also requires employers to include compensation and benefits information in postings for jobs that have the potential to be performed at least partially in Colorado.
Though the EPEWA became effective January 1, 2021, a recent notice from the Colorado Department of Labor and Employment (“CDLE”) signals that at least some covered employers have not yet achieved full compliance with its requirements and that the CDLE intends to be aggressive in its enforcement efforts, particularly as it relates to remote work opportunities. In the notice, the CDLE contends that because all remote jobs have the potential to be performed at least partially in Colorado, covered employers must include required compensation and benefits information in all remote work postings. Per the CDLE, if an employer has at least one employee in Colorado, the employer cannot achieve compliance with the EPEWA by simply excluding Coloradans from consideration for such remote positions (e.g., by stating “Coloradans need not apply”). In short, if an employer has any employees in Colorado, it will need to comply with the compensation and benefits notice requirements for all postings relating to jobs that could be performed in Colorado (including remote work).
Connecticut’s An Act Concerning the Disclosure of Salary Ranges (effective October 1, 2021)
Similar to, yet far less comprehensive than Colorado’s EPEWA, Connecticut’s An Act Concerning the Disclosure of Salary Range for a Vacant Position (the “Act”) requires covered employers (i.e., those with at least one employee in Connecticut) to disclose the wage range for vacant positions to both job applicants and current employees. The Act defines the wage range as the range of wages an employer “anticipates relying on” when setting wages for a position, and may reference information such as applicable pay scales or the budgeted amount for the position.
Starting October 1, 2021, covered employers must provide wage ranges to job applicants for the position(s) to which the applicant is applying either: (1) upon the applicant’s request, or (2) prior to or at the time the applicant is made an offer of compensation—whichever is earliest. Similarly, covered employers must provide wage ranges to current employees for the employee’s position upon: (1) hire, (2) change in position, or (3) first request for a wage range—whichever is earliest.
The Act also expands employee protections against sex-based wage discrimination. Employers are now prohibited from paying workers at a rate less than the rate the employer pays to employees of the opposite sex for “comparable work,” instead of for “equal work.”
The Rhode Island Equal Pay Law (effective January 1, 2023)
Finally, employers with at least one Rhode Island employee will eventually need to comply with the myriad requirements established under the revised Rhode Island Equal Pay Law (“the Equal Pay Law”), which takes effect January 1, 2023.
Like covered Connecticut employers, employers subject to Rhode Island’s amended Equal Pay Law (i.e., those with at least one employee in Rhode Island) are required to provide wage ranges for open positions upon an applicant’s request. Additionally, employers must provide wage ranges to current employees at the time of hire and/or during employment upon an employee’s request. If a current employee transfers to a new position, employers must automatically provide the wage range for the employee’s new position, even if the employee does not request such information.
In addition to expanding the current prohibition against wage discrimination from “equal work” to “comparable work,” the Equal Pay Law also extends the prohibited bases of wage discrimination to include not only sex, but also race, color, religion, sexual orientation, gender identity or expression, disability, age, or country of origin.
Perhaps most notably, the Equal Pay Law creates a safe harbor for employers that voluntarily conduct a good-faith audit of their pay practices (i.e., during the period January 1, 2023 through June 30, 2026)—and eliminate any unlawful wage differentials revealed by the audit. An employer that has performed a qualifying pay practice audit—which must reflect due diligence to identify, prevent, and mitigate violations—is not liable for liquidated damages or civil penalties. At this time, neither the law nor the state agency who will be responsible for enforcing the revised Act offer further instruction regarding how employers can successfully perform a qualifying pay practice audit.
Recommended Next Steps
Considering the idiosyncratic and multi-factored nature of these equal pay obligations, employers covered by one or more of these laws should take steps now to ensure timely and effective compliance. Specifically, employers with operations or any remote workers in Colorado, Connecticut or Rhode Island or who are hiring for remote work that may be performed in one of these states should review current pay and job posting policies to ensure they comport with updated state law requirements—and, if they do not, take measures to achieve compliance immediately in Colorado or before the effective date in Connecticut and Rhode Island. Covered employers may also wish to conduct comprehensive compensation assessments to ensure that actual compensation is consistent with ranges identified in job postings, and that employees are receiving equal compensation for comparable work regardless of their demographic backgrounds. Finally, employers—particularly those with remote workers or multi-state operations—should also monitor proposed equal pay legislation in other states, including New York.
For assistance in reviewing your organization’s compensation policies and practices, for guidance on how to conduct an effective compensation audit, and for the most up-to-date information on emerging state equal pay laws, contact your local Quarles & Brady attorney or: