Coming to a State Near You … Pay Transparency Laws

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At the end of last year, you might have heard stories from your stressed-out colleagues in New York City and California about how they scrambled to post salary ranges on job postings to comply with local "pay transparency" laws that were taking effect. A few of you may have asked about these laws, but maybe you just tuned out the chaos because you don't work in either state or were too busy with your own year-end reporting. If you chose not to pay attention to what was happening, I am not here to blame you -- but the time for ignorance is over, as pay transparency laws will be coming to your state, and you need to be prepared.

So, what is a pay transparency law? Put simply, while the specific requirements of these laws vary by jurisdiction (hint: consult your lawyer!), the basic premise is the same -- these are laws that require employers to provide candidates with salary information that was previously confidential. In certain jurisdictions, companies must publish an estimated base salary (or hourly wage) range in all job postings (Colorado, New York City, California and Washington). In some states, the provision of this information is not required until interviews are completed (Nevada) or offers are extended (Connecticut, Rhode Island). While providing a salary range does not lock the company into paying within the range, it should reflect the minimum and maximum amounts that a company anticipates paying for the role. Importantly, the focus to date has been on publishing base salary ranges, but Washington also requires a general description of benefits.

To date, thirteen cities and states have enacted pay transparency laws, and many more are on the way. In 2023 so far, at least nine other cities and states have proposed similar laws, and the New York City Council has already introduced an amendment to the law that took effect in November 2022! This amendment expands the scope of the law to include a requirement to publish available benefits, equity, stock options, bonuses and other forms of compensation. Each law also includes penalties for non-compliance, including fines of up to $250,000 per violation in New York City.

Why is this happening now? Pay transparency laws are just the latest tool being used by states and cities to combat the historic and ongoing pay gaps that exist based on gender and race. Indeed, these same jurisdictions are among the over twenty jurisdictions that have previously enacted laws banning questions about an applicant's salary history. Will pay transparency laws solve the problem of pay equity gaps? Probably not on their own, but breaking down the walls around salary data is an important step to the ultimate goal of equalizing pay.

I have worked with many employers to comply with pay transparency laws and have seen firsthand the positive transforming effect that this work can have. If you are in a jurisdiction without a pay transparency law, this is the time to make sure that you are prepared. Start by evaluating your existing compensation practices to make sure that you are paying your current employees fairly and equitably. If there are variances based on prior experience or other factors, make sure that they can be justified. Again, I suggest that you do this with your lawyer, who can also guide you through any problems that you may find along the way. Most employers are worried that their published salary ranges will be used by current employees to get raises or bring lawsuits. If your self-audit is successful, you will be in a comfortable position to respond to any questions from your employees. You should also spend time training your executives and managers on receiving and responding to questions regarding pay practices. A best practice is to designate a person -- or a team of people -- to field these questions in a clear, confident and caring manner. And what if you forget, or are not ready in time, to comply in one of your postings? Many of the laws give you one free shot to correct your mistake before assessing fines or other penalties.

After years of working with corporate clients to prepare for compliance with these laws, while also working with individual clients who are happy to have salary data for their job searches, I can confidently tell you that pay transparency laws can be a win-win for your company. It goes without saying that equal pay should be a goal for every company in 2023. But the laws also have other benefits, as initial reports show that job listings containing salary data are far more popular with job seekers, and current employees are more trusting of employers who are transparent with them. In this tight labor market, these are important points you can score with potential and current employees.

This article was written by Peter Rahbar, an employment attorney, workplace issues expert and founder of The Rahbar Group.

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