Pay Transparency Laws are on the Rise – What Employers Need to Know

Last week (November 1, 2022), New York City Local Law 59 came into effect. The law requires employers with four or more employees working in New York City (NYC) to publish salary ranges for every advertised job, promotion or transfer opportunity that could or will be performed in NYC. A covered employer must exercise good faith in determining the appropriate salary range to be published. There are exclusions to this requirement for temporary staffing agencies and jobs that cannot or will not be performed, at least in part, in NYC.

Many employers prefer not to advertise their salary information because they do not want competitors using that information to gain an unfair advantage in recruiting talent. Be that as it may, pay transparency laws have been on the rise the past few years and show no signs of slowing down. The intent behind these laws is to narrow gender and racial pay gaps. Colorado and Connecticut have existing pay transparency laws while California, Washington and New York State have laws set to take effect in the coming year.

Given the rise of remote work arrangements, it is important that employers analyze whether they may be subject to any pay transparency laws when they post positions. Even if an employer does not have a formal office in a state/county/city that has in place a pay transparency law, an employer might find that the applicable pay transparency law applies to positions which are filled by applicants who live and work in those areas. For example, under Local Law 59, a job that allows for remote work in NYC on a hybrid schedule will require the salary range to be included on the job posting.

Many employers are now struggling with what to do when conducting a national search given that there is only a small percentage chance that the successful candidate will be in a jurisdiction that subjects the business to the requirements of a pay transparency law. Some employers are responding by making the decision, as part of their commitment to diversity, equality and inclusion, to be transparent about their pay practices even if not legally required. Other employers are taking the position that the job is not intended to be performed in these pay transparency jurisdictions and therefore they are not going to comply. In the event the successful candidate is from one of those jurisdictions, then these employers will look for ways to comply with the law after the fact, such as by reposting the position with the salary ranges listed, before extending the offer to the candidate. A business should consult with legal counsel to understand the risks associated with such an approach.

For organizations subject to pay transparency laws, now is the time to prepare your human resources team and frontline managers on how to have conversations around the organization’s compensation system. As some managers may have been taught it is best not to discuss wages openly, training on how to have an open dialogue on the subject with applicants and employees is important. Further, leadership should be prepared to respond to any employee questions or points of concern with the compensation system.

Employers should also review their compensation system and address any inconsistencies or possible inequities. Employers not yet subject to a pay transparency law can benefit from this practice as well, as it is likely statutes such as this will become more prevalent in the coming years. A review of the compensation system should include asking questions such as whether the wage ranges for positions make sense based on the type of work to be performed and the location where the work is will be performed. The review should also include analyzing current employee compensation levels and how they align to the stated ranges and to each other. Employers may find that adjustments need to be made based on performance or market conditions. Of course it also is never good for morale if a position advertisement reflects a pay range that is above the salary of a current employee who is currently performing the job, or informs a current employee with years of experience and seniority at the company that they are on the low end of the range.

Adopting an organization’s practices to meet pay transparency law requirements can be daunting. If you are undertaking this task, know that Verrill’s Employment and Labor Practice Group is here to answer any questions you may have.