- Moving beyond preventive actions. While preventive actions are still a critical component of any employer’s compensation program, the focus has broadened to include pay disclosure. Compliance with pay disclosure laws is particularly complicated for employers operating in multiple states.
- Four types of pay disclosure laws. There are four main types of pay disclosure laws in effect in the United States, including pay secrecy, salary history bans, pay reporting requirements and pay transparency laws.
- Increasing pay transparency. There has been an influx of pay transparency laws that fall into one of three categories. Employers must (1) include pay ranges in job postings; (2) provide an applicant with the applicable pay ranges upon request; or (3) proactively provide that pay range after an interview.
Pay equity has been a significant focus for employees, employers and state and federal enforcement agencies for the past five to six years. Until recently, the attention was singularly focused on the sudden rise in class action pay discrimination claims at the state and federal level.
Compensation and HR professionals were focused on implementing preventive measures, including robust companywide privileged pay equity analyses, and voluntarily remediating any unexplained pay differences.
While preventive actions are still a critical component of any employer’s compensation program, the focus has broadened to include pay disclosure. Compliance with pay disclosure laws is particularly complicated for employers operating in multiple states. The movement has been spearheaded primarily by state and local governments resulting in a tangled web of conflicting compliance requirements.
Pay Disclosure Laws
There are four main types of pay disclosure laws in effect in the United States that employers must be cognizant of.
1. Pay Secrecy Prohibited. The days of employers prohibiting employees from discussing their pay with co-workers are long gone. The National Labor Relations Act (NLRA) makes it unlawful for employers to prohibit employees from discussing issues that impact their work, including their pay. Additionally, since Jan. 11, 2016, Executive Order 11246 has prohibited federal contractors and subcontractors from retaliating or discriminating against employees and applicants for inquiring about, discussing or disclosing their own compensation, or the compensation of any other employee or applicant. Twenty-one states and the District of Columbia have passed similar laws allowing employees to discuss and disclose their pay.
2. Salary History Bans. There are 21 states and 21 localities that have implemented laws prohibiting employers from asking applicants about their rate of pay at a current or former position. Employers, who are currently asking applicants about their prior pay, should end this practice regardless of where they are located. This is an area that is constantly changing, making it difficult for multi-state employers to accurately track where it is still permissible to ask about prior pay.
3. State Pay Reporting Requirements. To date, only California, Illinois and Minnesota require employers to submit a pay date report.
- California: Employers with 100 or more U.S. employees and at least one employee in California must a submit an annual report of the number of employees within each establishment by race, ethnicity, and sex by job category and pay band and hours worked during the prior year. Beginning in 2023, employers with 100 or more employees will also have to submit a pay data report for employees hired through labor contractors, such as temporary staffing agencies, and provide the median and mean hourly rate for each combination of race, ethnicity and sex for each job category for both traditional employees and those hired through labor contractors.
- Illinois: In March 2021, Illinois became the second state to require that private employers produce workforce demographic and pay data. Unlike California, the Illinois pay data report requires employers with 100 or more employees in Illinois to report employee-level pay information. In addition, pursuant to Illinois law, employers must apply to the Illinois Department of Labor (IDOL) for an Equal Pay Registration Certification (EPRC). The application for an EPRC includes the submission of wage records covering an employer’s Illinois-based employee population, and a signed verification, referred to as the Equal Pay Compliance Statement, that the business complies with state and federal anti-discrimination laws. Employers must recertify every two years.
- Minnesota: Contractors doing business with the state of Minnesota must apply for an Equal Pay Certificate if they have a contract worth at least $500,000 and at least 40 full-time employees in Minnesota or if Minnesota is their primary place of business for at least one day during the 12 months preceding execution of the contract. The certificate is valid for four years from the date it is issued.
4. Proliferation of State and Local Pay Transparency Laws
The proliferation of varying state and local laws requiring employers to disclose pay rate/ranges for available jobs either proactively or when requested is sending employers into a tailspin.
The theory behind pay disclosure laws is similar to the purpose underlying laws prohibiting pay secrecy. If applicants and employees know what the job they want pays, they can more effectively negotiate a compensation rate that is in line with the pay of other similarly situated employees.
Pay disclosure laws fall into one of three categories. Employers must (1) include pay ranges in job postings; (2) provide an applicant with the applicable pay ranges upon request; or (3) proactively provide that pay range after an interview.
As pay transparency obligations rapidly evolves, it is critically important that compensation and HR professionals, particularly those with operations in multiple states, stay abreast of new developments in pay transparency and seek the advice of counsel on strategies for compliance.
The following list identifies the states and localities that have pay disclosure laws in effect and the timing of the disclosure.
- California: The Pay Transparency for Pay Equity Act, which takes effect on Jan. 1, 2023, requires employers with 15 or more employees to include pay scale or hourly wage ranges in job postings. In addition, covered employers must provide the pay scale for the position to applicants upon request after an interview and upon request to current employees. Before Jan. 1, 2023, covered employers must include salary or hourly wage scales to applicants upon request after the applicant has completed an initial interview.
- Colorado: The Equal Pay for Equal Work Act was effective on Jan. 1, 2021. Employers with at least one employee must disclose the hourly rate/salary or applicable pay range and a description of benefits and other compensation offered in all internal and external job postings.
- Connecticut: The Act Concerning the Disclosure of Salary Rage for a Vacant Position, effective Oct. 1, 2021, applies to employers with one or more employees even if the employer is located outside of Connecticut. Employers must provide the applicable pay ranges for the position applied for upon request or before extending an offer, whichever is earlier. Similarly, employers must provide employees with the wage range for their position upon hire, a change in position, or upon request.
- Maryland: The Equal Pay for Equal Work Act, effective Oct. 1, 2020, requires that employers provide the pay range for the applicable position to applicants upon request.
- Nevada: Pursuant to Nevada’s Pay Transparency Act, effective on Oct. 1, 2021, employers and employment agencies must provide the wage or salary rate/range to applicants after they complete an interview. Wage or salary information must be provided to employees who have applied for a promotion or transfer to a new position after application, completed interview, after receipt of an offer or upon request.
- Jersey City, New Jersey: Jersey City’s Municipal Ordinance, effective April 13, 2022, applies to employers with five or more employees, whose principal place of business is in Jersey City. Covered employers must include in job postings the minimum and maximum range for each position, promotion or transfer opportunity.
- New York: New York State legislature passed pay transparency legislation requiring that employers with at least four employees and employment agencies include the minimum and maximum salary or hourly rage in any advertisement for a job, promotion or transfer opportunity. The bill is awaiting the signature of the governor.
- Ithaca, New York City and Westchester County all implemented similar pay transparency laws effective in 2022. Employers, employment agencies and their agents must include the minimum and maximum salary range or hourly rate in postings for a job, transfer and promotion. Ithaca’s law applies to employers with four or more employees working in Ithaca and the definition of “employee” does not include individuals employed in domestic service or by their parents, spouse or child. New York City’s law applies to employers with four or more employees, at least one who works in the city. It does not apply to temporary employment with a temporary firm or to jobs that will not perform at least some work in in the city. Westchester County’s law applies to positions that will be performed at least in part in the county except temporary jobs with temporary placement agencies.
- Cincinnati and Toledo, Ohio: As of 2020, employers with 15 or more employees and employment agencies must provide the pay scale for a position after the applicant makes a “reasonable request” and has received a conditional offer of employment.
- Rhode Island: Effective Jan. 1, 2023, employers must provide the wage range for a position to an applicant upon request or prior to discussing compensation. With respect to employees, employers must provide the wage range at time of hire, when employee moves into a new position, or upon request.
- Washington: Employers with 15 or more employees must provide applicants with the minimum wage or salary for the position sought upon request but after receiving an initial offer. The same information must be provided to employees who have received an internal transfer or a promotion. Effective Jan. 1, 2023, covered employers must include the applicable wage scale or salary range and a general description of benefits and other compensation in job postings. Employers must provide wage scale or salary range to employees upon request or when offered an internal transfer to a new position or a promotion.
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