- Hawaii is the latest state to implement pay transparency laws. On Jan. 1, Hawaii joined eight other U.S. states with active pay transparency laws: California, Colorado, Connecticut, Maryland, Nevada, New York, Rhode Island and Washington.
- A global wave. Canada and the European Union are leading the worldwide trend toward increased pay transparency, including through the EU’s pay transparency directive.
- AI and pay transparency. Recent EEOC Title VII guidance requires employers to review their use of artificial intelligence as it relates to compensation decisions.
Hawaii rang in the new year by joining eight other states with active pay transparency laws: California, Colorado, Connecticut, Maryland, Nevada, New York, Rhode Island and Washington.
Hawaii’s Senate Bill 1057 mandates employers with 50 or more employees to disclose hourly rates or salary ranges in job listings reflecting expected compensation. As in other states, certain job listings are exempt from the requirement, including those for public employee positions and those for which compensation is determined under collective bargaining.
Hawaii’s law also excludes jobs filled through internal transfers or promotions, a departure from most other pay transparency laws. In addition, it prohibits discrimination based on any protected category and emphasizes equal pay for substantially similar work.
Meanwhile, Colorado’s first-in-the-nation pay transparency legislation — Equal Pay Transparency Rules— received an update on Jan. 1.
Under that law, “career development” is now defined as a “change to an employee’s terms of compensation, benefits, full-time or part-time status, duties, or access in order to further advancement to update the employee’s job title or compensate the employee to reflect work performed or contributions already made by the employee.”
Illinois passed its pay transparency legislation last August, but the law won’t take effect until 2025. Massachusetts is poised to follow, with its House voting in October in favor of a bill that would require businesses that employ 25 or more employees to disclose the salary range or hourly wage range in job postings.
States that considered pay transparency in the 2023 legislative session included Alaska, Kentucky, Maine, Michigan, Missouri, Montana, New Jersey, Oregon, South Dakota, Vermont and Wisconsin. The District of Columbia did so as well.
Pay transparency is also gaining a foothold north of the border: The Canadian province of Ontario is set to pass a law that will require employers to disclose wages or salary ranges in job postings, joining British Columbia and Prince Edward Island, which enacted pay transparency laws in the past two years.
‘Greatest Disruptor’
Despite this momentum, the pay transparency movement’s “greatest disruptor” may actually be an ocean away, said Christine Hendrickson, vice president of strategic initiatives at Syndio.
“The EU’s pay transparency directive is not just a regulatory change,” she said. “It’s a harbinger of a new standard in workplace transparency, demanding unprecedented openness in both pay and career progression.”
The directive also requires a new, cross-functional look at pay equity that examines not only gaps within groups of employees performing equal work but also opportunity gaps.
Even if your organization doesn’t operate in EU member states, Hendrickson said, the ripple effects of the EU’s initiative will influence policies and corporate practices far beyond Europe’s borders.
“Global cross-pollination is the name of the game,” she said.
Mind the Pay Gap
When it comes to how organizations rate on pay transparency, there’s one metric that can’t be ignored, Hendrickson said, and that is the unadjusted pay gap. This metric compares the average pay of different groups — say, men and women.
“It’s quickly becoming the metric to measure whether a company is fair and equitable,” she said. “And it’s not just a ‘nice to have’ or something to delegate to the legal team. There’s major legislative and shareholder momentum at play, with more coming.”
But employers looking for a quick fix for addressing pay gaps are likely to be disappointed, Hendrickson cautioned.
Even if an organization somehow achieves 100% pay equity — equal pay for equal work, for example — employers may still have an unadjusted pay gap between what female employees earn overall and what male employees earn overall, she said.
“And this is often even larger for Black, brown, and Indigenous women,” Hendrickson said. “This can be due to women not being represented in leadership positions and other higher-paying roles over time.”
AI and Pay Transparency
Another developing storyline in pay transparency is the Equal Employment Opportunity Commission’s Title VII guidance that requires employers to review whether their use of artificial intelligence (AI) creates disparate impacts, or unintentional discrimination, that may violate employment law.
This guidance applies to compensation decisions and affects employers that use algorithmic decision-making tools such as pay equity software, said Robert Sheen, chief executive officer at Trusaic.
“The guidance makes it clear that employers are responsible for their tools even if they’re designed or administrated by a software vendor,” he said.
With more than 25% of the labor force now covered by some form of pay transparency law, Sheen said that many employers will want to develop a consistent policy around salary transparency across their workforce regardless of whether they are currently obligated to do so.
“In fact, it will likely benefit all employers to consider this step, as we’re seeing more and more states enact or consider enacting pay transparency legislation,” he said.
Employers should also proactively prepare for and conduct regular pay equity analyses because analyzing pay disparities will allow them to identify where any issues might exist.
“By preparing in advance,” Sheen said, “they can get a head start in evaluating their organization’s compensation from a pay equity lens and take remedial steps prior to making public disclosures of salary.”
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