Pay Transparency Laws Call For High Employer Due Diligence

What employers must consider

An emerging issue employers should plan to address during the coming year involves pay transparency, a requirement for employers to disclose wage information to applicants or employees.

In 2022, major companies including Wells Fargo, IBM, and American Express enacted policies around pay disclosure. Two states (California and Rhode Island) and Washington, D.C. adopted their own pay transparency laws, while other states and cities are working to adopt their own. Some require employers to provide the salary range to current employees who are changing roles if they request the information (Washington, D.C.).
 

As of January 3, the following states or cities have passed pay transparency laws: California; Colorado; Connecticut; Ithaca, New York; Jersey City, New Jersey; Maryland; Nevada; New York City; Rhode Island; Toledo, Ohio; Washington, D.C.; and Westchester County, New York.

Employers with offices in different states now face the challenge to ensure they are up to date with each state’s laws (and some cities) regarding pay transparency. Some states, like Colorado, have very specific requirements and other states only require pay disclosure if an applicant or employee requests the information.

In addition to the various state law requirements around pay transparency, the National Labor Relations Act (NLRA) can protect discussions involving compensation as concerted activity at the federal level. For federal contractors, the Office of Federal Contract Compliance Programs (OFCCP) prohibits policies that discourage pay transparency, and employees and applicants should now feel free to openly discuss pay ranges.

Add in the increasingly common use of remote work, and employers have many mitigating factors to consider in what is and isn’t required.

When faced with this increasingly challenging regulatory environment, the best option for employers might be to take control of the situation and create policies and best practices instituting companywide transparency. This can be not only proactive but also beneficial to company culture to take this step even if not currently required by law. In addition to showing support for pay equity and addressing often persistent and inherent wage gaps across gender and racial identities, this helps move toward compliance if and when a law does take effect requiring the practice.

Specific to job postings, pay ranges included should always be in good faith for what an employer could reasonably expect to pay the designated position.

Based on the current trends, employers should consider:
●    Implementing or updating internal salary transparency policies or protocols by providing existing employees the same access to the pay data as new hires or applicants.
●    Conducting salary market research to support a company’s compensation model.
●    Conducting a pay equity analysis to ensure current salaries are in line with applicable law.
●    Ensuring that documentation justifying pay exists, as well as explanations for deviations for pay protocols.
●    Training managers and supervisors on pay protocols, including a section on implicit bias.

Employers have a unique opportunity to assess both current compliance needs and proactive opportunities to address this important issue. Attracting and retaining top talent remains a high priority, and the expectations of job candidates continues to shift toward pay transparency as a requirement and not a perk.

Author Bio

Spencer Fane Partner Ruthie White helps employers resolve labor and employment disputes in and out of court.