Until recently, no one talked about their pay, and discussing wages and pay amounts was actually forbidden in a number of workplaces. Those days are gone, and all someone needs to do now is a quick Internet search to find out any given salary for a variety of jobs around the United States. So, what changed? The laws and rules about pay transparency.
Many states are enacting significant legislation pertaining to disclosures and information about salary and wages, with consequences for employers that are not in compliance. These laws and rules are often now collectively referred to as pay transparency or salary transparency laws. As more states enact this type of legislation, pay transparency is here to stay. Therefore, employers need to be aware of the changing laws in states where they do business and have (or are hiring) employees, and they may need to adjust their hiring and information/data practices to comply with the continually evolving state laws.
So, here are some things employers need to know now:
- Public Policy – Providing More Information and Knowledge to Employees
- The primary purpose of pay transparency is providing job candidates and current employees with more information about salary and benefits, particularly in job postings.
- Many legislators hope this will create more pay equality/equity and result in fewer wage gaps among people in the workforce.
- State Laws, Rules, and Regulations Can Vary Widely
- Many states have now enacted some type of regulation regarding pay transparency. At the time this article is being released, there will soon be ten states with pay transparency laws in effect that require some form of wage and/or benefits disclosures in advance of hiring a new employee (or in some states for any open position, even internal promotions and transfers). These states are: California, Colorado, Connecticut, Maryland, Nevada, New Jersey, New York, Ohio, Rhode Island, and Washington.
- Many states have some type of law pertaining to employee wage disclosures. Minnesota, for example, has a wage disclosure law that prevents employers from prohibiting their employees from disclosing their personal wages (this is distinguishable from appropriate restrictions of supervisors and others who have access to other employees’ salary information that can be considered confidential and be appropriately restricted in a properly written handbook policy). Aside from the states listed above with more rigorous pay transparency laws, the law in Minnesota is representative of a number of states that have laws related to wage disclosure. These laws also comport with the National Labor Relations Act, which protects the rights of employees to engage in “concerted activity” regarding the terms and conditions of their employment, which includes wages and benefits.
- Other states, such as California and Colorado, have pay transparency laws that require employers to provide a salary range and benefits within a job posting. Therefore, if an employer is seeking to hire in those markets, the posting must include disclosure of a salary range.
- Colorado’s regulations are expansive, as it requires compliance with its law for all possible job candidates, including any position that could be filled by a Colorado resident. In other words, even if an employer is seeking a completely remote employee, that employer will need to comply if the candidate pool could include Colorado residents.
- Rhode Island enacted its pay transparency legislation, which took effect as of January 1, 2023. Employers are not subject to civil penalties for violations until after December 31, 2024. However, even though employers are granted a grace period to begin compliance with this new law, it will be important to make changes now to avoid future dispute.
- Cities Are Also Joining the Pay Transparency Push
- In addition to the state law considerations discussed above, there are a number of cities that are taking matters into their own hands by passing ordinances for employees and/or employers located within that particular city.
- A few examples include: Jersey City, New York City, Toledo, and Cincinnati.
- Many of these cities are requiring employers to include the salary range and benefits that will be offered for open positions in these cities.
- Pay Transparency with Existing Employees
- Pay transparency is not only applicable to new hires and recruiting.
- As more job posts include pay ranges, current employees will likely have access to that information. Therefore, employers should assume that employees know the pay ranges for their position and others.
- In addition, as in states like Minnesota, employees are no longer prohibited from discussing wage and salary information with each other.
- In many of the states with more rigorous pay transparency laws, even if an employer is only looking to fill a position with internal candidates, it may still be required to circulate an internal job posting that includes pay ranges to all eligible employees.
- Ultimately, employers should assume that employees know the pay range for their job and others, and that they likely know where they stand in that range when compared with their colleagues.
- Employer Impact and Potential Penalties
- Pay transparency can impact employers as employees learn more about potential pay ranges for themselves and others. However, failure to comply with pay transparency rules can result in significant penalties and fines.
- Penalties vary from state to state (or city to city).
- Depending on the jurisdiction, employers that violate the pay transparency laws can be subject to fines ranging from $500 to $10,000 per violation.
- Such penalty risks can increase depending on the number of violations and employees/potential employees involved.
- Employers in some states may be subject to civil liability and are opening themselves up to civil lawsuits.
- Some states even allow for additional civil penalties of up to 10 percent of the amount of damages found in a civil lawsuit.
- Ultimately, failure to comply with pay transparency can be costly, so it is important to pay attention to the applicable laws, rules, and regulations.
Pay transparency will have a significant impact on the information available to current and potential employees, the types of job postings, and the posting content that employers must consider. As discussed above, there are a number of variables, including the candidate pool, the states involved, the position the employer is attempting to fill, and the required disclosures to consider when posting for an open position. So, now is the time to assess your organization’s pay transparency practices and compliance.
For more information about pay transparency laws, rules, and regulations, please reach out to FMJ’s Litigation and HR & Employment Teams. They can help with compliance audits, review job postings, analyze wage/pay disclosure practices, and assess and help implement pay transparency strategies. Please contact Shannon McDonough, Natolie Hochhausen, and Jamie Briones for additional information.
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