Publication

Colorado continues to broaden its employment laws and now has deviated from following federal statutes. Companies that employ individuals in Colorado must be aware of these changes, which went into effect on August 7, 2023. The changes revise the standard for harassment, defenses based on compliant policies, and requirements related to non-disclosure agreements. We anticipate significant litigation based on these changes as courts interpret the statutory language and recommend employers review their handbooks, training policies, and separation agreements to assure they are compliant.

Governor Polis signed the Protecting Opportunities and Workers' Rights Act ("POWR") into law on June 7, 2023. It took effect on August 7, 2023, at 12:01 a.m. It applies to employment practices on or after the effective date.

New Standard for Harassment:

The new law rejects the “severe and pervasive” standard and adopts a new multi-factor standard.

Harassment is defined as engaging in unwelcome physical, verbal, written, or visual communication directed at an individual based on that individual’s membership or perceived membership in a protected class. The conduct must be:

• Subjectively offensive to the individual alleging harassment, and
• Objectively offensive to a reasonable individual who is a member of the same protected class

The new law states that the nature and frequency of past harassment is irrelevant in making this determination. “Petty slights, minor annoyances, and lack of good manners” will not constitute harassment typically, but can constitute harassment looked at in combination under the totality of the circumstances. See below.

Totality of the Circumstances Factors:

• Frequency of harassment
• Number of individuals engaged in the conduct
• The nature of the conduct or communication
• The duration of the conduct or communication
• The location where it occurred
• Whether the conduct or communication was threatening
• Whether any power differential exists between the plaintiff/accused
• Any use of epithets, slurs, or other humiliating or degrading terms
• Whether the conduct or communication uses stereotypes of a protected class

Affirmative Defense:

When an employee proves that a supervisor harassed that employee, the employer may assert a defense if they can establish that they have established a program that is designed to prevent harassment. The program will satisfy this affirmative defense if the employer can prove the following:

• Employer takes prompt, reasonable action to investigate or address allegations;
• Employer takes prompt, reasonable remedial actions when warranted in response to complaints;
• Employer has communicated the existence and details of the anti-harassment program to their supervisory and nonsupervisory employees; and
• The employee has unreasonably failed to take advantage of the employer’s program

Other New Harassment Violations:

Other violations of the new harassment section include:

• Making submission to the harassing conduct a term of employment
• Basing employment decisions on submission to, objecting to, or rejecting the harassment
• If the harassment unreasonably interferes with the individual's work creating a hostile work environment

Marital Status:

Marital status has been added as a protected class. The law continues to include disability, race, creed, color, sex, sexual orientation, gender identity, gender expression, religion, age, national origin, and ancestry.

The law explicitly prohibits employers from discharging or refusing to hire/promote an employee on the basis that the employee is married or plans to marry another employee of the same business. However, this does not apply to employers with 25 or fewer employees.

Disability:

The law states that an employer may refuse to hire, promote, demote, or discharge an employee with a disability if there is no reasonable accommodation that the employer can make with regard to the disability that would allow the individual to satisfy the essential functions of the job; however, it removes language stating that “the disability has a significant impact on the job.” In short, employers must find that the individual is actually disqualified from performing the essential functions of a job and can no longer state that the disability has a significant impact on the job.

Employment Agencies:

The law prohibits employment agencies from refusing to refer an individual for employment for a known available job if they are otherwise qualified and prohibits agencies from complying with requests from employers to list jobs that either directly or indirectly discriminate on the above classes.

Labor Organizations:

Unions, labor organizations, and apprenticeship programs are likewise held to the same standards of discrimination as employers. They cannot deny membership on these bases.

Non-Disclosure Agreements:

NDAs entered into or renewed on or after August 7, 2023, that limit the ability of the employee or prospective hire to discuss any alleged unfair employment practice are void unless several elements are met:

• The NDA must apply equally to all parties to the agreement;
• The NDA must state that it does not restrain the employee from disclosing the underlying facts of the unfair employment practice (including the existence and terms of a settlement) to certain enumerated individuals (e.g., spouse, attorney, etc.) and agencies or as otherwise required by law;
• The NDA must state that disclosure of the underlying facts of the unfair employment practices does not constitute disparagement;
• If a non-disparagement provision is included in the agreement, it must contain a condition that if the employer disparages the employee or prospective employee to a third party, the employer may not seek to enforce the non-disparagement or nondisclosure provisions of the agreement or seek related damages (though the remainder of the agreement remains enforceable);
• Any liquidated damages provision in the agreement must meet certain enumerated criteria;
• The agreement contains an addendum signed by all parties to the agreement attesting to compliance with these requirements

Liquidated Damages Provisions in NDAs:

Any liquidated damages provisions in NDAs may not constitute a penalty or punishment. In order to be enforced, it must provide for an amount of damages that is reasonable in light of the economic loss a breach would cause, varied based on the severity of the breach, and include an addendum signed by all parties to the agreement attesting compliance with these requirements.

Damages & Penalties for Non-Compliant NDAs:

Violating even one section of this subsection makes an employer liable for actual damages and a $5,000 penalty per violation. An employee or prospective employee who brings an action based on an unfair NDA can collect actual damages, reasonable costs, and attorney’s fees.

If an employer can show that the act or omission was committed in good faith, the court has the discretion to decline penalties or reduce penalties.

NDAs as Evidence for Punitive Damages:

In any civil action involving a claim of unfair employment practices, a plaintiff can present evidence that the employer against whom the action was filed entered into one or more agreements that included NDAs involving the same conduct of the same individual(s) who are accused of the unfair employment practice. If this evidence is presented, it will be evidence in support of punitive damages.

Recordkeeping for Employers:

Employers are now required to keep personnel records that the employer made, received, or kept for at least five years after 1) the date the employer made or received the record or 2) the date of the personnel action to which the record pertains, whichever is later.

Employers are now additionally required to maintain a designated “repository” for all written or oral complaints of discrimination or harassment including the date of the complaint, identity of the complainant if possible, identity of the accused, and substance of the complaint. These records are not open to public investigation.

Notably, this recordkeeping requirement includes the following:

• Complaint of harassment or discrimination (written or oral)
• Employment applications
• Requests for accommodation
• Forms related to hiring or promotion
• Forms related to demotion, transfer, layoff, and termination
• Rates of pay or compensation schedules
• Selection for training, partnership, or apprenticeship
• Records of training for employees