This article originally appeared in Law360 Employment Authority on July 19, 2021. It is republished here with permission.
What is happening out in Colorado?
Sitting here in my New York City office, I have in the last few weeks received an unusual uptick in queries about a relatively new Colorado employment law, the Equal Pay for Equal Work Act,1 which went into effect Jan. 1.
The queries are coming not from employers that are based in Colorado, have an office or facility in Colorado, or even have an employee working in Colorado, but rather from employers who have no connection at all to Colorado, except that they might hire someone who would work remotely from Colorado.
This development is likely due to an unusual confluence of circumstances, including: (1) the continuing, proactive legislative push for laws designed to eradicate inequitable pay practices that discriminate on an unlawful basis (e.g., sex or race), (2) advancing technologies that make remote work more effective, and (3) evolving conceptions of the workplace, suddenly accelerated by COVID-19, where workers can do their jobs remotely from anywhere outside an employer's office or facility and in jurisdictions where the employer may have no presence otherwise, including in Colorado.
There is nothing novel about state legislatures taking action to refine their equal pay laws to promote and ensure pay equity in the workplace. In recent years, this has been happening around the country, including in New York.2
Such refinements have often involved prohibiting3 employers from asking job applicants about their salary history or expanding4 protections based on sex to other protected categories (e.g., race, age, sexual orientation, etc.).
Colorado's EPEWA is certainly part of that evolution, but it presents something entirely different and novel in requiring that employers:
Indeed, no other state has ever before required employers to include compensation rate information in their job postings.
As a general matter, employers consider and treat compensation information as confidential for strategic reasons and purposes. How an employer compensates its employees is often considered an important and proprietary aspect of how it competes for talent in the marketplace, and competitive advantage can be derived from keeping that information confidential and away from competitors.
The EPEWA's expansive reach has only magnified the discomfort, if not difficulty, for employers, especially those outside Colorado. The compensation disclosure requirement applies not just to postings for jobs in Colorado, but also to any posting for a remote position that could be performed in Colorado.
Consequently, for example, the New York employer that is open to filling positions with remote workers (perhaps even more so as a consequence of the COVID-19 pandemic) now must consider the EPEWA and disclose compensation information in any job posting if the position might be filled by an applicant in Colorado.
Employer efforts to avoid the EPEWA were immediate. In fact, before the law became effective, the Rocky Mountain Association of Recruiters sued the Colorado Department of Labor and Employment in the U.S. District Court for the District of Colorado, seeking to enjoin the job posting requirements on constitutional grounds.
Among other things, the RMAR claimed that the posting requirements created an excessive burden on interstate commerce and conflicted with similar statutory schemes in other states.
In late May, the court issued an order5 denying the request for preliminary injunctive relief, and the EPEWA's posting requirements continued in effect. The RMAR subsequently withdrew the action.
One possible workaround for multijurisdictional employers could be to make Colorado workers ineligible for posted jobs; i.e., if the job was not to be performed in Colorado, then none of the EPEWA posting requirements would apply.
While this approach to EPEWA avoidance is legal, it could prompt a public relations backlash against employers that use it.
Employers may not want to disclose proprietary compensation information in their job postings, but many also may not want to be perceived as dismissive of pay equity concerns or the laws purportedly designed to address them.
While the EPEWA's compensation posting requirement has garnered much of the public attention, its promotional opportunity requirements present their own unique challenges for employers.
The statute requires employers to alert current employees of any promotional opportunity, which is further defined as any vacancy in a new or existing position that might be deemed a promotion for any employee.
There are certain exceptions, including that notice need only be given to Colorado employees. Consequently, a multijurisdictional employer without Colorado employees may avoid this aspect of the EPEWA.
However, an employer with Colorado employees could, for example, find itself wondering if lower-level workers in Colorado must be alerted to an anticipated CEO vacancy based in New York City.
Violating the EPEWA could have real and impactful consequences. The statute provides for fines ranging from $500 to $10,000 per violation and creates a private right of action for wage discrimination that allows for damages of up to three years of back pay to an aggrieved individual or employee.
So what to do about the EPEWA if you are an employer with no connection to Colorado, but with an interest in hiring remote workers from anywhere in the U.S.?
Some may want to perform a public relations calculus and opt to avoid the statute by excluding from these jobs any work or workers from Colorado.
Others may endeavor to comply, but in ways that will not compromise their proprietary compensation schemes or methodologies.
For example, because the EPEWA requires that a covered job posting include either a compensation rate or a compensation range, an employer may post as broad a compensation range as possible and include a variety of qualifiers relating to any compensation determination, including qualifications, experience and geographic location.
In doing so, the employer is required only to provide a good faith, reasonable estimate of the range of possible compensation for the posted position.
The returns on the impact of the EPEWA are early. However, employers around the U.S. that do or could have jobs filled by workers in Colorado need to be aware of the EPEWA's potential impact on their job postings and other hiring/promotion practices and should review their options and actions carefully as a consequence.