Thoughts on Colorado’s Equal Pay for Equal Work Act

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It was about a year ago that we first started hearing about Colorado’s Equal Pay for Equal Work Act (SB19-085) and I knew it was going to be national news. We’d just gotten past the “Rocky Mountain High” jokes, and our lovely state was trying to break new ground again. But even my Texas friends were not going to be able to get out of this one.

The Equal Pay for Equal Work Act requires 5 things from public and private businesses that have even just one employee based in Colorado:

  1. Employers must be able to account for any wage rate differences between employees of different genders who are doing the same job
  2. Employers are prohibited from seeking a prospective employee’s wage rate history
  3. Employers are required to provide notice to employees of all opportunities for promotion or advancement
  4. Employers are required to disclose compensation and benefits for each job posting that is to be performed in Colorado or even for jobs that can be performed remotely from anywhere
  5. Employers must maintain records of each employee’s job description and wage rate history for the duration of their employment and for 2 years after

At Thought Ensemble, we spent many leadership meetings in Q4 of 2020 discussing this legislation and had multiple conversations with our attorneys trying to figure out what we had to do to navigate it. It felt like it was going to be a major challenge.

For us though, as annoying as it was at the time — because it was yet another thing to add to our plates and there were so many questions about how to move forward — the implementation of changes related to this legislation was actually not all that difficult. Besides changing some of the guidelines in our recruiting processes, the biggest impact for us was the posting of salaries in job descriptions. We complied, and it was largely a non-event — at least for our company. It was a little uncomfortable, but if we hadn’t already been paying fairly, it would have been A LOT more uncomfortable. Fortunately, over the last few years, we had already established a very thorough pay review process that defines pay bands by level and evaluates pay equity (at least) annually. And we don’t negotiate outside of those levels (even when we have a recruit we really want or need) so we really didn’t have anything to hide.

However, over the last year, I have been listening and reading with some fascination about how other local and national business leaders are reacting to this. And this summer, Colorado did end up making national news as some out of state employers refused to comply:

The Wall Street Journal: Many Companies Want Remote Workers — Except From Colorado

The Atlantic: Companies Want Remote Workers in All States but 1

While I was initially quite frustrated, the more objections I hear, the more I become convinced that this new law may be onto something. In parallel, I’ve been diving deeper into the gender equity topic, especially since it has been a big topic among my small CEO group within Colorado Inclusive Economy. I admit that I’m a bit blown away by all the things that women have going against them in this pay equity battle and I’m becoming increasingly concerned about inequities everywhere.

Now, it’s hard for me not to think about equity when I hear people cite their complaints about the new law. For example:

“We can’t interest people if we show the salary right away.”

This may be true, however, it now feels both manipulative and completely inefficient to lure people in and have them spend a bunch of their time (and the company’s) interviewing if the salary isn’t even right in the first place. I’d rather find other ways to attract people more transparently.

“Posting salary bands will give recruits too much negotiating power.”

This is a big equity one, especially related to gender. Transparency absolutely does give recruits more power, but if we want more equity, we have to level the informational playing field. I don’t want to be a business leader who pays people less than they are worth just because I can get away with it.

“Our existing employees will be upset and/or ask for more.”

I know this is a financial reality and it is hard, however, when I think about longtime, loyal employees I start to wonder why a job-hopper should be paid more. I’d rather pay employees based on the value of their work instead of based on their ability to negotiate (unless of course, the ability to negotiate is a large part of their job description).

“Competitors can steal our people away by offering more than we are.”

It is a brutal fact, but I’ve come to believe that if I’m underpaying my people for their work, and there isn’t some big non-financial upside, then they probably should go somewhere else. If I’m unable to pay a competitive wage for my people, I need to adjust my business model or find ways to attract employees with other benefits.

When I think about it, all these objections are the reasons we don’t have equality of pay today. Believe me, I get it! Running a business is hard, but imagine a world where pay is more transparent. What if we had businesses that could attract and retain people who also knew what everyone else was making? How much more successful and sustainable might those businesses be?

I do however acknowledge the challenge around the timing of this Colorado law. Inflationary wage pressures, along with the incredible challenges attracting talent in general are impacting every company across every industry. Even for companies who are on board in principle, it is a very tough time to make these changes. However, I believe there’s an opportunity for companies to fundamentally rethink pay and benefits as part of their overall business model, and engage their people in a more transparent conversation about it. I’m seeing many companies take this head-on and I love it.

For us though, a year in at this point, I’ve largely let go of my frustration with this law and come around to its benefits. What businesses have been doing to date hasn’t worked for gender equity or pay equity in general. Perhaps a bigger move is necessary. Maybe Colorado is onto something.

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