Starting from November 1, 2022, a new comprehensive law regarding salary transparency has taken effect in New York City. According to this law, companies hiring employees in the city must indicate the minimum and maximum salary range for any job posting, whether in print or online.
The purpose of this legislation is to empower workers by providing them with more information on their employer's pay practices, thus enabling them to negotiate their salaries more effectively. The ultimate objective is to address the wage gap, which sees women in the US earning 83 cents for every dollar earned by white, non-Hispanic men, and women of color receiving as little as 49 cents for every dollar, as per a March 2022 fact sheet published by the National Partnership for Women & Families.
Although transparency laws aimed at closing wage gaps are rapidly emerging across the country, the result is a fragmented patchwork of regulations that can pose a compliance challenge for organizations.
Starting January 1, 2023, California also requires companies to feature compensation and benefits information in their job postings.
Similarly, Colorado's Equal Pay for Equal Work Act, which took effect at the beginning of 2021, obligates employers to disclose the compensation range and general description of all employee benefits in their job postings. Furthermore, it prohibits employers from paying employees of a different gender less for work that is substantially similar.
Apart from California and Colorado, several other states including Connecticut, Maryland, Nevada, New York (effective from Sept. 17, 2023), Rhode Island, and Washington have enacted laws on pay disclosure in job postings. A few counties and cities across the United States also have pay disclosure regulations in place.
Furthermore, several states have banned employers from preventing employees from sharing their salary information, and also from retaliating against them for discussing their pay with colleagues. Some states and localities have also passed laws and regulations prohibiting companies from requesting salary information from job seekers.
To help organizations navigate the complex web of legislation on pay disclosure, in-house counsel can focus on six crucial elements of state and local laws:
- Employee eligibility and exemptions: Does the law apply to external job applicants and current employees? Are certain employers exempt from the law, such as those with fewer than 15 employees? Are remote positions exempt from the requirements?
- Required information: What specific details does the law mandate employers to disclose, such as a general description of the pay scale or specific application to bonuses and commissions? Are employee benefits, like healthcare and retirement plans, also subject to disclosure requirements?
- Timing and triggering events: When does the law take effect? What employee information requests must employers fulfill? Are there additional salary disclosure obligations when employers announce promotion opportunities?
- Notice and posting requirements: What channels must employers use to inform employees and job seekers of pay scales? Can employers keep some job openings confidential? Are third parties engaged to recruit job candidates subject to the disclosure requirements?
- Penalties: What are the potential fines for non-compliance? Are there any mitigating circumstances that will be taken into account? Is there a private right of action for individuals seeking injunctive or other relief?
- Other key provisions: Can employers post compensation ranges with significant gaps between the lowest and highest salary figures? Is there a good faith provision allowing employers to pay more or less than the posted range under certain circumstances? What record-keeping requirements exist for job descriptions and wage rates?
In addition to seeking guidance from legal counsel on the relevant provisions of pay disclosure laws, employers can take practical steps to minimize their exposure. Here are some proactive measures to consider:
- Salary benchmarking: Employers should compare the salaries they offer with those of their competitors to ensure they are offering competitive compensation. This should be done by comparing equivalent job duties rather than titles and with current pay data, preferably less than 6 months old. Employers may consider hiring an outside consulting firm to conduct this benchmarking.
- Review and create compensation bands: After gathering benchmarking data, employers should create compensation bands showing minimum, middle, and maximum pay for each job level to help avoid pay equity claims and pay secrecy. These ranges should be reviewed and updated at least every 6-12 months.
- Educate managers: Managers must be informed of the employer's commitment to equitable compensation and be trained on documenting and justifying hiring, promotion, disciplinary, and termination decisions. This will help to defend against potential pay discrimination claims. Managers should also avoid taking adverse action against applicants or employees who raise complaints about potential pay discrimination.
- Keep up with the law: Employers should regularly review state and local law surveys on pay transparency to keep up with evolving requirements.
- Revise job postings: Employers may want to revise job postings to meet the most restrictive pay transparency requirements to ensure compliance. Companies can also opt to customize job postings to meet the pay transparency requirements of each state or locality.
- Consider prohibiting salary negotiations: Employers may want to consider prohibiting salary negotiations to avoid pay disparities and ensure equal pay for equal work.
- Conduct regular pay equity audits: Regularly investigating pay equity is a best practice. If an audit reveals unjustified pay disparities, the company should take corrective action, such as adjusting pay ranges to ensure equal pay for equal work.
