Pay Transparency Laws
Only a small number of jurisdictions have laws requiring employers to provide information about employee compensation in job postings, but pay transparency is becoming a best practice in corporate America. There is a growing movement among organizations of all sizes to now include pay ranges in their job postings, regardless of whether they are subject to pay transparency legislation.
Employers should be aware of the states and cities that have implemented pay disclosure requirements, which typically also apply to remote workers, to avoid violations. Workplaces implementing a pay transparency policy should also understand its legal risks, including possible exposure to equal pay and discrimination claims.
The Pay Transparency Push
Led by a younger generation of workers and a greater emphasis on equity, pay transparency is now becoming more common. Since 2020, eight states and several localities have passed salary range laws, while many more locations are considering them. Legislation and rules have been proposed at the federal level to address pay transparency as well.
States and Cities With Pay Transparency Laws
As of June 2024, eight states have enacted salary range transparency laws:
California
Colorado
Connecticut
Maryland
Nevada
New York
Rhode Island
Washington
In addition to these states, the following cities and counties have pay transparency laws:
Cincinnati and Toledo, Ohio
Ithaca, New York
Jersey City, New Jersey
New York City
Westchester County, New York
As salary transparency requirements take hold, more than a dozen other states and cities have recently introduced legislation to require job compensation disclosures. They include Alaska, Hawaii, Kentucky, Maine, Massachusetts, Oregon, South Dakota, Vermont, Virginia, Washington, D.C., and Chicago.
Many organizations are now listing starting pay in job postings, regardless of whether it is required by law, signaling that companies are anticipating the spread of pay transparency legislation.
Employer Requirements Under Pay Transparency Law
Salary range transparency laws that are currently on the books impose various requirements on employers, creating a regulatory patchwork that must be carefully navigated by those who may be subject to more than one of the new laws.
The major areas in which these laws differ include the following:
● Employers covered. Some laws, such as Maryland’s statute, broadly cover an employer who is engaged in business in the state. Others only apply to employers with a minimum number of employees, but that number ranges from one to fifteen depending on the state.
● Information shared. Laws may require employers to publish the pay range or a description of the compensation package, including benefits, that a job offers.
● When and where information is shared. State laws also differ regarding when and where job listing information must be shared. Pay transparency may be required in job postings, upon request, for applicants, for applicants and employees, for internal transfers and promotions, or a combination of the foregoing.
● Remote workers. Companies employing remote workers may have to comply with the salary transparency laws in the states where their remote workers live and work. Certain jurisdictions, including Colorado, California, and Washington, have issued guidance clarifying that their pay transparency law applies to job openings that could be filled by a worker based in that state, including either in-person or remote workers.
● Noncompliance consequences. Failure to comply with a pay transparency law could lead to an administrative enforcement action or a private civil lawsuit, depending on the applicable law. Remedies may include damages, injunctive relief, and civil penalties of up to $10,000 per violation (California) to $250,000 per violation (New York City).
Employers—especially those thinking about a voluntary pay transparency program to attract talent—must also consider that there are legal risks to disclosing pay information that fall outside the statutory authority of pay transparency legislation.
If a compensation disclosure reveals evidence of a pay gap or discrimination (i.e., employees who are paid less for the same work), the company could face a class action lawsuit brought by employees or enforcement action from state and federal agencies.
Call Us to Review Your Employment Policies
Employers adopting a pay transparency policy for any reason should consult with a business attorney to ensure that their program is crafted in a way that maximizes the benefits of greater openness and minimizes the potential risks. If you need assistance with employment-related legal issues, contact our attorneys and schedule a meeting to learn how we can support you.
