Summer associate Payton Armstrong contributed to this article.
Pay transparency laws require employers to disclose compensation information to applicants and potential employees, and impose job notice requirements and recordkeeping regulations. The goal of pay transparency laws is to promote fairness and equity in the workplace as well as reduce pay disparities based on factors like race, gender, or ethnicity. While there is no federal pay transparency law, 11 states have current or pending pay transparency laws including California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, New York, Rhode Island, Washington, and Washington D.C. 13 other states have proposed legislation including Alaska, Kentucky, Maine, Massachusetts, Michigan, Missouri, Montana, New Jersey, Oregon, South Dakota, Vermont, Virginia, and West Virginia and changes in these states may be forthcoming.
Some state laws, like the Washington State Pay Transparency Law, require employers to disclose the wage scale or salary range, and a general description of all benefits and other compensation offered for each job posting. A “posting” can be defined differently under each state law. For Washington state employers, a “posting” means any solicitation, electric or in printed form, intended to recruit job applicants for an available position that includes qualifications for desired job applicants. The requirement to provide a “wage scale or salary range” also obligates employers in Washington to determine the wage before the job is posted, ensure it is not open-ended, and if there is a starting range, both the starting range and general range must be included. It applies to employers with at least 15 employees including out-of-state employers with one or more Washington-based employees. Washington’s Department of Labor and Industries can issue a citation for any non-compliance for statutory damages equal to the actual damages or $5,000, whichever is greater, interest of one percent per month on all compensation owed, and costs and reasonable attorneys’ fees to an employee as a result of a violation.
Some state laws extend to internal posting. California’s Pay Transparency Act requires employers to disclose a pay scale in external and internal job postings including remote jobs for employers with 15 or more employees with at least one working in California. It also requires an employer to disclose a position’s pay scale to current employees. A “pay scale” is defined as the salary or hourly range that the employer reasonably expects to pay for the position which does not include benefits or other forms of compensation. Additionally, California law requires private employers of a certain size to submit annual pay data reports to the state. Employers who do not submit reports may face penalties up to $100 per employee with subsequent failures incurring penalties of $200 per employee. Employers can also face civil penalties of $100 to $10,000 from the California Labor Commission as well as injunctions and class action lawsuits for non-compliance.
Other states’ laws continue to emerge with additional requirements. Colorado’s Equal Pay for Equal Work Act expanded on job opportunity notices, post-selection notices, and career progression notices. Notice of job opportunities must disclose compensation, benefits, and the application process. “Job opportunity” is now defined broader to include current or anticipated vacancies for which the employer is considering a candidate or that the employer externally posts. There are exceptions, for example, where an employer has a compelling need to keep an opening confidential because the position is held by a current employee. Certain non-competitive promotions such as career development, career progression positions or acting, interim, or temporary roles do not require job opportunity notices. In addition, employers not physically located inside of Colorado that have fewer than 15 employees working remotely in Colorado are also excluded from job opportunity notices. The post-selection notices require employers to make reasonable efforts to provide information to employees with whom the employer intends the person selected will work with regularly. For career progression notices, the amended law requires employers to inform employees with an objective career progression, the requirement for advancement, and what the potential compensation would be to just all eligible employees. Colorado employers must maintain an employee’s job description and wage rate history records for up to two years following their termination. Employers who fail to comply may be imposed a fine by the Colorado Department of Labor and Employment between $500 and $10,000 per violation.
The takeaway for employers is that times are changing, and states are adopting robust laws to require employers to provide applicants with more information about compensation, regardless of whether that position is performed in that state. The pay transparency trend is widespread as almost half of the states have adopted or passed pending legislation to increase such laws. Understandably, employees now expect to see their potential compensation before applying for a position to compare it with other similar roles.
For more information regarding pay transparency laws and their application to your business, please contact Mike Laszlo.
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