Two new Colorado laws will begin to impact businesses Jan. 1.
The Equal Pay for Equal Work Act will require many businesses to take a comprehensive look at their pay structures and job descriptions.
The Healthy Families and Workplaces Act will require them to examine and perhaps revise their paid sick leave policies.
Reanna Werner, a human resources consultant who owns HR Branches, is concerned that many small businesses aren’t aware of these new pieces of legislation.
“I’m worried that employers aren’t getting this information,” Werner said. “It’s not that the information isn’t out there. It’s just getting a little bit muted because of our news cycle.”
Lorrie Ray, an attorney with Employers Council in Denver, agrees.
“These laws have become very complicated, and they’re not easy to follow,” Ray said. “I fear that a lot of employers are going to be caught unaware.”
It’s incumbent upon all businesses to familiarize themselves with the provisions of these new laws and to take the necessary steps to comply with them. Now is the time to do that, Werner said.
EQUAL PAY ACT
On average, women in Colorado make 86 cents for every dollar earned by men. The pay gap is even wider for Black and Latina women; they earn 63.1 and 53.5 cents on the dollar that men earn.
The Equal Pay for Equal Work Act, signed into law on May 22, 2019, endeavors to close those gaps, which are reported in the act’s legislative declaration.
All employers in the state, regardless of their size, must comply with the law, which prohibits paying employees of different sexes differently for similar work.
According to the Employers Council, its major provisions are:
• Employers must announce job openings and promotion opportunities within the company and must disclose the pay rate and benefits for the job openings.
• Employers must maintain records of job descriptions and wage rate histories for each employee during employment and for two years after employment ends.
• Employers cannot prohibit employees from disclosing or talking about their pay.
• Employers cannot ask for the wage history of job applicants or rely on their wage history to determine their current wages.
• Employers cannot discriminate or retaliate against a job applicant for failing to disclose wage history.
The law specifies some exceptions to a wage differential, if an employer can show that:
• It is not based on wage history;
• Seniority or a merit system is involved;
• Wages are based on production quantity or quality;
• Work is performed in different geographic locations;
• The differential is justified by education, training or experience;
• The differential is justified by travel that is a necessary and regular condition of the job; and
• These factors are applied reasonably and account for the entire wage rate.
Employees who believe an employer has violated the act may file a complaint with the Colorado Department of Labor and Employment or file a private civil lawsuit.
Employees can recover back wages, plus liquidated damages equal to the amount of back pay owed, and attorneys’ fees. Penalties up to $10,000 may be imposed against employers who violate the law.
The law contains a “safe harbor” provision for employers who have performed a pay equity audit in a genuine effort to identify and correct pay disparities. Employers may avoid liquidated damages if they have performed a pay equity audit within the two years prior to a complaint.
Because of the safe harbor provision, Employers Council recommends that every Colorado business perform a pay equity audit and make sure that pay systems are documented in employment policies and used consistently.
EQUAL PAY PROVISIONS
Under the new law, employers must be able to prove that the wages they pay are equitable.
“What that ends up meaning is that they need to have job descriptions that describe the positions” in a way that clearly differentiates job duties and requirements, including those that have similar titles, Ray said.
“It requires that you look across your employee population and determine who’s in the same or similar position and who’s not,” she said. “There may be a really good reason why you have classified them differently. But it’s best to have a job description that clearly explains that.”
A company may have several employees whose title is “manager,” but one may be managing 10-15 people, while another may not be managing any employees. The difference needs to be incorporated into their job descriptions.
Colorado’s law is broader than the federal equal pay act, which passed in 1963, Ray said. That’s because the Colorado measure specifies that employers can’t discriminate based on sex, or sex plus another protected status such as race or ethnicity, while the federal act addresses discrimination on the basis of sex alone.
In addition, the federal law provided a wider range of exemptions.
“Now in Colorado, those reasons are sharply reduced,” Ray said. “For example, let’s say I have a customer service rep, and I’m paying them $15 an hour, and then all of a sudden, there’s a huge shortage of customer service reps. So an incoming customer service rep, I’m going to pay more than my current customer service rep, even though they haven’t been with the company for very long, because I can’t find any customer service reps.
“If it turns out that there are men and women who are being paid differently as a result, or minorities are being paid differently, that ends up being an unlawful action under this law.”
What that means, Ray said, is that “you can no longer use market rates to bring in people at a higher wage. You have to use that market rate to shift your whole compensation plan. You’d have to raise everybody up to that new rate to bring the new customer service person in at a higher rate.”
The law is going to have a major effect on small businesses, Ray said, especially if they don’t have a strict compensation plan and sometimes pay what they think the market will bear.
One way employers can smooth out the differences a bit is by specifying pay ranges. While there are no specific limits on how broad those ranges can be, “there certainly are limits of what a judge or jury would say,” Ray said.
PREPARING FOR EQUAL PAY
In the past, it’s been customary for some businesses to have explicit policies that prohibit employees from talking about their pay.
“If any employers have that statement in their handbook or as a policy, they need to remove it immediately,” Werner said.
While it may rankle some employers that they now must disclose their pay practices and salary ranges, “the fact of the matter is, when you promote your pay practices, you actually get a better response in your candidate pool when you are advertising for open job postings,” Werner said.
Businesses also need to start creating job descriptions and wage histories for every employee.
“If you’re using a payroll provider, it’s not so hard to track wage histories, because that’s tracked through your payroll provider,” Werner said. “But if you are performing in-house payroll, you need to be diligent about your payroll records and make sure that you keep those job descriptions on file.”
Once job descriptions are clearly written, they need to be updated on a regular basis to make sure they are in compliance, said Karen Moldovan, policy director for Good Business Colorado, an organization that advocates for businesses and monitors legislation.
A good practice is to review job descriptions when employees are scheduled for their annual reviews. At that time, employers can make sure that their employees agree with their job descriptions, that they are fair and equal, that they appropriately represent the job, she said.
PAID SICK LEAVE ACT
The Healthy Families and Workplaces Act was signed by Gov. Jared Polis on July 15. Some provisions of the act took effect immediately: Employers with fewer than 500 employees were required to comply with the Families First Coronavirus Response Act, which mandates that they provide paid sick leave or extended family and medical leave for specified reasons related to COVID-19.
The additional provisions of the Healthy Families and Workplaces Act requiring paid sick leave for any health conditions and other issues will kick in Jan. 1, 2021, for employers with 16 or more employees. Beginning Jan. 1, 2022, all public and private employers must provide paid sick leave to their employees.
According to the Employers Council, the act provides that:
• Employers must provide one hour of paid sick leave for every 30 hours worked by an employee, capped at 48 hours of paid sick leave per year.
• Part-time employees must be covered based on the number of hours they work.
• Employers must allow employees to carry over up to 48 hours of sick leave into the next year, but they are not required to pay unused sick leave upon termination.
• Employers may provide more paid sick leave than the act requires but are not required to allow employees to accrue more than 48 hours per year.
Employers must permit employees to use their accrued sick leave on request under specified conditions. These include mental or physical illness, injury or health condition that prevents the employee from working; seeking a doctor’s care; preventive medical care; medical attention, victim services or mental health or legal services as a result of domestic abuse, harassment or sexual harassment.
Accrued sick leave also can be used if the employee must care for a family member because of a specified condition or needs to provide child care if schools or businesses are closed due to a public health emergency.
In case of a declared public health emergency, employers must add to employees’ accrued sick leave so that full time employees can take at least 80 hours of sick leave. For employees who normally work fewer than 40 hours a week, they must be allowed to take either the amount of time they are scheduled to work in a 14-day period or the average time they work in a 14-day period, whichever is greater.
Many companies already have paid-time-off policies that meet the requirements of the act.
“They just need to add information to that policy so employees know they must be allowed the use of paid leave when a family member or the employee requires care as specified in the act,” Ray said. “Then they’re going to need to make sure that the sick leave policy has up to 48 hours.”
Ray noted that the current COVID-19 public health emergency declaration lasts through Dec. 31.
“It well could be that the state of Colorado declares another public health emergency due to the pandemic” on Jan. 1, she said. “That would start that 80 hours all over again. If I’ve already used up my sick pay, then you have to add another 80 hours.”
The specified reasons for taking time off “are likely to be viewed as job-protected leave,” Ray said. “So an employer can’t fire an employee because they need to take time off if it’s within the requirements of the law.”
Werner noted that employers can require documentation to prove an employee or family member’s eligibility to take paid time off, such as a doctor’s note.
“Employers are required to provide written notice [of sick leave policy] to all their employees,” she said. “Most typically, this is going to be a policy included in the employee handbook. If you don’t have an employee handbook, you will have to provide your employees with some sort of written policy upon hire and let them know that they are eligible for this benefit.”
In addition, the state is creating a poster about paid time off that employers must display along with their other employment-related posters, she said.
“Employers do need to keep detailed records for every employee who takes this paid time off, and the time granted,” Werner said. “And they have to keep these records for two years after termination.”
These records must be kept separate from other personnel files and kept confidential.
Employers will have to shoulder the upfront costs of paying employees more if they have to adjust their compensation policies to avoid discrimination and of compensating them for nonproductive time, but they also will have administrative costs related to both the Equal Pay and Healthy Families acts, Werner said.
Going through a comprehensive pay equity analysis “is going to be a huge administrative project, and that will be ongoing, because you can’t just do it initially and then drop it,” she said.
Employers Council recommends that every employer consider a pay equity analysis and perform a review of their employee handbook.
Employers Council and HR consultants like Werner can assist with these processes and help employers understand where they are at risk and what measures need to be taken.
Employers also should talk with their attorneys and meet with their accountants to understand the financial impacts of both laws, Ray said.
She also suggests employers check in on a regular basis with the Colorado Department of Labor and Employment and consult with the Pikes Peak Small Business Development Center.
“They have a wealth of reliable, factual information and expert consultants who can help them through this,” Ray said.