Colorado Issues POWR Act Which Significantly Expands Workplace Harassment Laws, Limits Nondisclosure Provisions, and Other Changes to Employment Law

June 12, 2023 Employment Law

Summary:

Colorado employers need to be aware that the recently enacted POWR Act:

  • discards the “severe or pervasive” standard for harassment claims, lowering the standard for such claims in Colorado
  • adds multiple conditions an employer must meet to enter into a nondisclosure agreement with employees
  • requires Colorado employers to comply with robust record-keeping requirements for personnel and employment-related records

Background:

On June 6, 2023, Governor Polis signed into law the Protecting Opportunities and Workers’ Rights (POWR) Act, which imposes far-reaching changes to the Colorado Anti-Discrimination Act (CADA) and Colorado employment law generally. Among other changes, the law redefines the standard for harassment claims, sets stringent requirements on nondisclosure provisions, adds marital status as a protected category, and includes new requirements on the storage of personnel records.

A Lowered Burden of Proof for Harassment Claims

Arguably, the most material change to Colorado employment law is its redefining of harassment claims. Colorado had previously incorporated the federal law definition of “harassment,” which required conduct to be “severe or pervasive” to be considered harassment. Now, the severe or pervasive standard no longer applies in Colorado. Rather, conduct that is “subjectively offensive to the individual alleging harassment and is objectively offensive to a reasonable individual who is a member of the same protected class” will be considered harassment under Colorado law. By eliminating the “severe or pervasive” standard and replacing it with one that requires only “offensive” conduct, the threshold for establishing a viable harassment claim under CADA has been significantly lowered.

Notably, however, there are still some guardrails in place to guide which claims may be actionable. Namely, the conduct at issue must fall in one of three categories for a harassment claim to be viable:

  • Submission to the conduct or communication is explicitly or implicitly made a term or condition of the individual’s employment; or
  • Submission to, objection to, or rejection of the conduct or communication is used as a basis for employment decisions affecting the individual; or
  • The conduct or communication has the purpose or effect of unreasonably interfering with the individual’s work performance or creating an intimidating, hostile, or offensive working environment.

Further, while the law expressly states that the frequency with which alleged harassment in the workplace is “not relevant” as to whether the conduct gives rise to a viable claim,  it also expressly states that “petty slights, minor annoyances, and lack of good manners do not constitute harassment unless the slights, annoyances, or lack of manners, when taken individually or in combination under the totality of the circumstances.” It is worth noting, however, that drawing the line between a “petty slight” and a comment that unreasonably interferes with an employee’s work performance will be challenging.

Affirmative Defenses for Harassment Claims Limited

The POWR Act also limits an employer’s ability to assert an affirmative defense to a harassment claim in cases where the employee alleges harassment by a supervisor. Specifically, the employer can only assert an affirmative defense to this type of claim if it meets each of the following requirements:

  • The employer has established a program that is reasonably designed to prevent harassment, deter future harassers, and protect employees from harassment. To make this showing, the employer must both “take prompt, reasonable action to investigate or address alleged discriminatory or unfair employment practices” and
  • “take prompt, reasonable remedial actions, when warranted, in response to complaints of discriminatory or unfair employment practices.” In short, employers must both have a program to prevent and deter harassment and take appropriate action in response to complaints of discrimination in order to assert an affirmative defense; and
  • The employer has communicated the existence and details of how to make complaints to both its supervisory and nonsupervisory employees, such as through a handbook or policy; and
  • The employee has unreasonably failed to take advantage of the reporting program.

This approach modifies the long-recognized Faragher-Ellerth affirmative defense by requiring proof of a reasonable program to prevent harassment as well as proof of prompt and reasonable remedial actions to meritorious complaints. Employers can establish and publicize a program to deter harassment and a system in place to investigate harassment complaints in order to preserve their ability to assert an affirmative defense to a harassment claim.

Framework for Disability Discrimination Modified

The law also modifies the framework for disability discrimination claims. CADA previously provided it was not a discriminatory practice for an employer to take an adverse employment action “if there is no reasonable accommodation that the employer can make with regard to the disability, the disability actually disqualifies the individual from the job, and the disability has a significant impact on the job.” POWR eliminates the requirement that the disability had “a significant impact on the job.” The loosened standard now provides only that it is not a discriminatory practice for an employer to take an adverse employment action “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 and the disability actually disqualifies the individual from the job.”

Marital Status as a Protected Category

The POWR Act also adds “marital status” as a protected category in the employment context, meaning that employers cannot take any adverse action against an employee based on marital status.

Stringent Non-Disclosure Agreement Requirements

The law adds multiple, specifically enumerated requirements that must be met for a nondisclosure provision to be enforceable in the employment context. The POWR Act voids nondisclosure agreements entered into after its effective date that “limit[] the ability of the employee or prospective employee to disclose . . . any alleged discriminatory or unfair employment practice” unless the provision meets each of the following conditions:

  • it applies equally to the employer and employee;
  • it expressly states that it does not restrain the employee from disclosing the underlying facts of any alleged discriminatory or unfair employment practice;
  • it expressly states that disclosure of the underlying facts of any alleged discriminatory or unfair employment practice does not constitute disparagement;
  • it provides that if the agreement contains a non-disparagement provision and the employer subsequently disparages the employee, the employer may not seek to enforce the non-disparagement or non-disclosure provisions or seek damages for an employee violating those provisions;
  • any liquidated damages provision may not constitute a penalty or punishment and must provide for an amount of damages that is reasonable, proportionate, and not punitive; and
  • the agreement contains an addendum, signed by all parties to the agreement, which attests to the compliance with each of the above requirements.

Failure to adhere to these stringent requirements would expose an employer to significant risks. Specifically, if an employee is simply presented with a noncompliant nondisclosure agreement, they may immediately sue the employer and recover penalties—each violation of the above requirements can incur a penalty of $5,000—including actual damages, costs, and attorneys’ fees. What’s more, an employee is permitted to support their punitive damages claim with evidence that the employer offered other employees nondisclosure agreements “involving the conduct of the same individual or individuals who are alleged in the action to have engaged in the discriminatory or unfair employment practice.”

Record-Keeping Requirements

POWR now requires employers to maintain “any personnel or employment record” the employer made or received for at least five years and, with regard to complaints of discriminatory or unfair employment practices, to maintain those records in a designated repository. Notably, “Personnel or employment records” are defined broadly to include:

  • requests for accommodation;
  • employee complaints of discriminatory or unfair employment practices;
  • application forms submitted by applicants for employment; and
  • other records related to hiring, promotion, demotion, transfer, termination, rates of pay or other terms of compensation, and selection for training or apprenticeship, and records of training provided to or facilitated to employees.

Effective Date

August 7, 2023.

What To Do Now?

Employers should begin preparing now to ensure they are in full compliance. To preserve their affirmative defense to harassment claims, employers should ensure they have established and implemented a program to prevent and deter harassment, and to investigate any harassment claims that arise in the future. Employers should also consider revising agreements with nondisclosure provisions to comply with the specific rules laid out in the new law. Further, companies will need to implement new processes to retain personnel files and employment records for five years in compliance with the law’s record-keeping rules.

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