Hey Compliance Warriors!
The Colorado DOL has issued its final equal pay transparency rule. Read on…
On November 10, 2020, the Colorado Department of Labor and Employment (CDLE) issued its final Equal Pay Transparency (EPT) Rules implementing Colorado’s Equal Pay for Equal Work Act, which goes into effect January 1, 2021. The final EPT Rules differ significantly from the proposed rules, particularly with respect to the compensation range disclosure requirements for jobs performed outside Colorado. The final Rules, however, still require any employer with even one Colorado employee to do the following:
- Inform all Colorado employees of promotional opportunities worldwide (even if the employee is manifestly unqualified for the job).
- If an employer posts a job to be performed in Colorado, or that can be performed remotely from anywhere, to include in the posting the compensation range for the position and descriptions of incentive compensation and benefits.
This article first summarizes the key changes from the proposed rules to the final rules. We then walk through various scenarios with the specific compliance obligations.
Changes and Clarifications in Final EPT Rules
Geographic Limitations and Extraterritorial Reach
The most controversial aspect of the proposed EPT Rules concerns the extraterritorial effect, effectively requiring employers to disclose salaries for posted jobs to be performed outside Colorado. Section 4.3 of the proposed EPT Rules, that walked through specific scenarios for jobs inside Colorado, outside Colorado, and remote (to be performed anywhere), has been replaced in its entirety by the following provision:
4.3 Geographic limits. For compliance with the requirements to post “all opportunities for promotion to all current employees” (C.R.S. § 8-5-201(1)), and post “in each posting for each job opening the hourly or salary compensation, or a range …, and a general description of all … benefits and other compensation” (C.R.S. § 8-5-201(2)):
(A) the promotion posting requirements (§ 201(1)) do not apply to employees entirely outside Colorado; and
(B) the compensation posting requirements (§ 201(2)) do not apply to either (1) jobs to be performed entirely outside Colorado, or (2) postings entirely outside Colorado.
The final EPT Rules place a finer distinction on the differences between the internal and external posting requirements contained in C.R.S. 8-5-201(1) and (2) than do the proposed rules (or the Equal Pay for Equal Work Act itself). Under the final EPT Rules, there is never any obligation to provide any notices regarding vacancies to employees outside Colorado. However, Colorado employees must be informed of promotional opportunities anywhere—nationwide or even worldwide. Employers may be tempted to try to avoid the effect of this rule by simply excluding Colorado employees from consideration for promotion for jobs outside the state. The CDLE takes the position that this workaround would be ineffective, since an employer cannot avoid informing employees of promotions even if they are not qualified for them. According to Rule 4.2.4, “Employers must notify all employees of all promotional opportunities, and may not limit notice to those employees it deems qualified for the position. . .”
The Equal Pay for Equal Work Act makes clear that the requirement to include compensation information is triggered by posting a job, that is, if an employer is required to post a job or chooses to post a job, the posting must include compensation ranges and a general description of benefits. According to the final EPT Rules, if the job is definitively to be performed outside Colorado, e.g., a CFO job in New York, there is no requirement to disclose compensation (internally or externally). However, Colorado employees must still be informed of the opportunity. Similarly, job postings that are entirely outside Colorado (i.e., paper job postings, as opposed to postings on the internet that can be accessed from Colorado) never need to contain compensation information. The upshot of Rule 4.3(B) is that if employers choose to post jobs on the internet:
- Colorado jobs must contain compensation information;
- Remote jobs that could be performed in Colorado must contain compensation information; and
- Jobs with a fixed location outside of Colorado do not need to contain compensation information.
This last provision of the final EPT Rules makes it even more likely that multi-state employers with remote jobs will exclude Colorado workers from consideration, as it is relatively clear that employers specifying that remote jobs can be performed anywhere except Colorado would be covered by the exclusion in 4.3(B), and therefore need not disclose compensation ranges and benefits.
Promotions in Seat
Several commenters suggested that the EPT posting requirements should not apply to ordinary career progression promotions, e.g., an employee moving from Engineer II to Engineer III. The final EPT Rules contain new language suggesting that such “promotions” are not subject to the internal posting requirements:
When required. A “promotional opportunity” exists when an employer has or anticipates a vacancy in an existing or new position that could be considered a promotion for one or more employee(s) in terms of compensation, benefits, status, duties, or access to further advancement.
This provision could be read as suggesting that career progression promotions are excluded, as there is no “vacancy” in—to use the above example—the Engineer III position. However, the Statement of Basis and Purpose the Division published along with the final rules makes clear that the rule is intended to apply to promotions in seat:
Even where a promotion is specific to an individual employee’s career trajectory (e.g., from junior to senior positions, or from training to full positions), notice of such advancement lets others similarly qualified, who may not know the employer is open to promotion requests, seek the same advancement. A research finding supporting the sort of redress for pay disparity that the Act implements is that women are less likely to self-promote; notice of in-line promotions ameliorates this problem. The Division does, however, find that the Rule 4.2.5(B) limited exception addresses the type of early career advancement that may be deemed not to be a “promotional opportunity.”
Accordingly, this language seems to indicate that the CDLE disregarded these comments by creating an exception in 4.2.5(B) for “automatic” promotions that occur within one year of the date of hire. As this does not appear to be a common practice, it provides employers with no meaningful relief. While the final EPT Rules may not accurately reflect the intent as expressed in the Statement of Basis and Purpose, it is clear the CDLE intends the rules to require that if an employer moves a California worker from Engineer II to Engineer III, the employer must inform all Colorado employees of the “promotion.”
The final Rules also exempt from the posting requirement temporary hires who work no more than six months that are not expected to be made regular employees as well as “acting” or “interim” promotions for the same timeframe. However, if the hire may become permanent, the required promotion posting must be made in time for employees to apply for the permanent position.
Littler’s Workplace Policy Institute, working with the authors of this article, submitted a detailed Public Comment on the Proposed EPT Rules urging the CDLE to exempt confidential searches from the scope of the internal disclosure rules. The CDLE agreed, to an extent. Searches for replacements for incumbents who are unaware that they will be separated are exempt from the internal posting rules. The CDLE did not, however, revise the proposed rules to create a broad confidentiality exception, such as when an employer is expanding into a new geographic or market segment.
Salary Ranges and Descriptions of Incentive Compensation
The Public Comment referenced above pointed out that the specific value of incentive compensation such as commissions and bonuses is often unknown at the time a position is posted. The CDLE created new Rule 4.1.1(B) to make clear that a “general description” of forms of incentive compensation is all that is required—not the specific range or monetary value.
The final Rules, like the proposed rules, require that a posted compensation range may extend from the lowest to the highest pay the employer in good faith believes it might pay for the particular job. An employer may ultimately pay more or less than the posted range, if the posted range was the employer’s good-faith and reasonable estimate of the range of possible compensation at the time of the posting.
Job Postings on Intranets
As urged by the authors of this article, the CDLE added section 4.2.3, making clear that an employer can comply with its internal employee notification obligations by maintaining a company intranet that lists available positions. For larger employers where substantially all employees have internet access, this is a welcome clarification because they will not need to individually send “push” notifications to employees regarding hundreds of jobs worldwide on a daily basis. But the news is less rosy for employers whose employees lack internet access, as the final EPT Rules make clear that alternate means of communication such as paper postings must be employed:
If a particular method reaches some but not all employees, such as an online posting not accessible to those lacking internet access, an alternative method shall be used for such employees.
Based on the CDLE’s refusal to make many of the suggestions submitted in response to the proposed rules, especially with respect to posting requirements for remote positions and the requirement to notify Colorado employees of any promotional opportunity worldwide, it appears that the Equal Pay for Equal Work Act is susceptible to a legal challenge. However, should that challenge not be made, or if it is unsuccessful, employers have six weeks to achieve compliance or face fines of $500 to $10,000 per violation.
For large employers with sophisticated intranet systems, compliance can be achieved by ensuring that all jobs (no matter where they are located) are posted to the company’s internal jobs website, including promotions in seat / career progression moves. This will likely require significant programmatic changes for most employers, as ordinary career progression moves are almost never currently posted.
For all Colorado jobs and remote, “work from anywhere” jobs that are posted internally or externally, the compensation ranges for the position and a general description of benefits must be included. In other words, the job must be posted internally (to employees for whom the jobs would be a promotion), and that posting must contain compensation information. If the employer chooses to post the job externally, that posting must contain compensation information. This will be a significant undertaking for many employers given the high volume of jobs and the fact that not all jobs have formal pay ranges. Care should be taken to ensure that there is a system to allow employees who might not otherwise have access to the intranet to receive information regarding those jobs. Moreover, employers will want to review whether the pay of incumbents falls within the range they are posting for a position to minimize potential employee relations issues.
Smaller Colorado employers are subject to the same rules, but posting may be more challenging. Where all employees work out of an office or store facility, the employer should post jobs where they may be easily read during the workday—such as in break rooms, on employee bulletin boards, and/or adjacent to time clocks, department entrances, and facility entrances. Alternatively, employers could set up a computer in a break room or other common area where employees could view job postings on an electronic portal. Or employers may be able to provide an app that employees could download to their mobile phones providing access to a job portal or intranet. All such postings must list compensation ranges for the positions and a general description of benefits. In the current pandemic, when many employees are working from home, smaller employers may be forced to email employees to inform them of opportunities.
Until Next Time,
Lisa Smith, SPHR