Several jurisdictions are in the process of passing, or have already passed, pay transparency legislation, including California, Colorado, Maryland, New York State, New York City, Rhode Island, and Washington, with some new legislation potentially coming into force in early 2023. While specifics vary based on the jurisdiction, below are some of the key emerging employer obligations and the ways employers can prepare.
Trends in pay transparency laws
The most common component of pay transparency legislation is the mandated disclosure of pay ranges to existing employees and job applicants. For existing employees, employers may be required to provide a pay range when hiring new employees, when employees change jobs, or when an employee requests this information. For job applicants, employers may be required to include a pay range within every job posting or provide a pay range upon request after interviewing a candidate. Additionally, most pay transparency legislation includes a stipulation that employers may not ask job applicants for their salary history.
For example, California’s Bill 1162, which is awaiting signature by Governor Newsom, would require that employers with 100 employees or more submit a report to the California Civil Rights Department identifying the number of employees in each of 10 job categories (including executive or senior level officials and managers; first or mid-level officials and managers; laborers and helpers; and service workers). The bill would require the disclosure of the median and mean hourly rate of pay within each of those job categories for each combination of race, ethnicity, and sex. It would also impose penalties of up to $200 per employee for failure to submit reports. Though the reports would remain confidential, this bill would assist the Civil Rights Department with enforcing civil rights laws that prohibit discrimination because of a protected characteristic.
How employers can prepare
Multi-state employers should be aware of the impact these requirements may have on their current record-keeping requirements, recruitment processes, and job postings. Depending on the state, the use of open-ended salary information within job postings, such as a statement to the effect that “pay will be determined based on experience,” may no longer be permitted.
Companies should also examine pay levels, posting practices, and hiring policies to ensure that pay range data is included, where necessary, and that applicants or employees do not face discrimination or retaliation based on a request for a particular position’s pay range. In some instances, employers may also need to avoid asking for an employee’s wage history; this may require employers changing recruitment and intake forms that ask candidates for this information.
Finally, employers should consider performing a pay equity audit. Such an audit typically examines pay ranges for similar jobs within the company based on race, ethnicity, and sex, and helps to expose potential blind spots, unconscious biases, or potential overt discrimination taking place within an organization. In response to increasing social and legislative scrutiny surrounding such inequities, employers can utilize pay equity audits to analyze and coordinate what they will need to do to shore up any pay discrepancies within their organizations. In addition to being the right thing to do, addressing pay inequity will help companies ensure they do not face penalties, inquiries, or public scrutiny, or that they will be ready with a plan in place to address any inequities that may exist.
The authors wish to thank David Dyckerhoff for assisting in the preparation of this article.