The past two years have undoubtedly been challenging for many
employers. Among other hardships, many employers are addressing
issues related to COVID-19, the Great Resignation (a catchphrase
related to the record number of employees resigning from their
current employment), and varying laws related to employee use of
medical and recreational marijuana. As if these challenges are not
enough, employers must now prepare to address one of the newest
trends in employment law—pay transparency.
Pay equity issues are not new in the United States. Indeed, both
the Equal Pay Act and Title VII of the Civil Rights Act were signed
into law nearly 60 years ago, but pay equity studies nevertheless
continue to show that women and employees of color are not paid as
much as their white male colleagues. In light of these issues,
states and municipalities across the country are using pay
transparency legislation to combat pay disparities and provide
applicants and current employees with pay information that will
help them evaluate their compensation as compared to their
peers.
One of the most recent pay transparency laws went into effect in
New York City on November 1, 2022. That law amended the city's
Human Rights Law to include a new discriminatory practice: failing
to include salary ranges in job postings. The law requires job
postings to include a salary range from the lowest to the highest
salary the employer in good faith believes it would pay for the
advertised job, promotion, or transfer opportunity. The law applies
to all employers with at least four employees if at least one
employee works in New York City (even in a remote capacity), and
the law applies to any position that
could be filled with a candidate who
lives in New York City or to any position that may be performed,
at least in part, in New York City.
Similarly, beginning on January 1, 2023, employers in California
with 15 or more employees must include a "pay scale"
(defined as the salary or hourly wage range the employer reasonably
expects to pay for the position) in any advertised job posting,
including positions posted by third parties. Furthermore, employers
in California will be required to provide their current employees
with the pay scale information upon request.
In addition to New York City and California, the following states
and localities have either passed legislation or have pending
legislation requiring varying degrees of pay transparency:
- Colorado
- Connecticut
- New York State
- Westchester County, New York
- Ithaca, New York
- Maryland
- Nevada
- Jersey City, New Jersey
- Cincinnati, Ohio
- Toledo, Ohio
- Rhode Island
- Washington
These pay transparency trends will very likely continue as more
and more states consider how to combat pay discrimination issues.
Thus, we recommend that employers who are or may become subject to
pay transparency laws take the following steps to prepare for the
current and/or future changes in this area of the law.
1. Consider Conducting a Pay Equity Study.
As previously noted, some pay transparency laws not only apply to
job postings, but some also allow current employees to request and
review employer pay scales. The publication of pay scales,
especially to current employees, may inevitably lead employees to
question and/or challenge pay disparities. Employers can
proactively address this issue by conducting a pay equity study,
which will allow employers to better understand if there are pay
disparities among existing employees. Importantly, the pay equity
study should, if possible, be completed subject to the
attorney-client privilege, as the failure to do so may allow the
study to be used against an employer if unexplainable pay
disparities are not appropriately addressed.
After collecting data from the pay study, employers should
determine if men, women, and other classes of protected employees
are paid equally. If the pay study exposes non-legitimate pay
disparities, employers should take appropriate steps to remediate
pay disparities, which may include compensation adjustments and the
implementation of process improvements for hiring managers and
other professionals responsible for pay decisions.
2. Prepare Management and Human Resources.
Employers should also invest time and resources in educating
management and human resources professionals on the current
landscape regarding pay transparency. Employers should move quickly
but carefully to determine good faith salary ranges for the varying
job classifications in the organization. Furthermore, individuals
responsible for posting job opportunities, especially remote or
multi-state job opportunities, should be trained on the intricacies
of current and pending pay transparency legislation. In that vein,
and as a practical matter, multi-state employers may find it
administratively efficient to adopt the most stringent pay
transparency requirements.
Employers should also consider revisiting their performance
evaluation standards to ensure there is a clear and accurate way
for individuals at all levels in the organization to evaluate
performance that is tied to pay. Indeed, an objective process tied
to performance and compensation adjustments can help mitigate pay
bias in the workplace.
3. Embrace the Change.
Current legal trends indicate that pay transparency is here to
stay. As employers face headwinds from a tough labor market and the
Great Resignation, it will be advantageous for employers to embrace
pay transparency and take proactive steps to find and root out
non-legitimate pay disparities in the workplace. The implementation
of non-discriminatory pay processes will not only allow employers
to attract, hire, and retain top talent, but doing so will also
help employers mitigate the risks associated with pay
discrimination claims.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.