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6 Key Elements of Pay Disclosure Requirement Laws That In-House Counsel Need to Understand

December 20, 2022

On November 1st, one of the most wide-ranging laws related to salary transparency went into effect in New York City. Businesses hiring workers in the city are now required to list the minimum and maximum salary range for a job on any printed or online posting.

The goal of the new law is to provide workers with more information regarding an employer’s pay practices so they have greater leverage to discuss and negotiate their salaries. The broader objective is to help close the wage gap.

A January 2022 report from the National Partnership for Women & Families found that women in the United States are paid 83 cents for every dollar paid to men, amounting to an annual gender wage gap of $10,435 on the median pay for full-time workers.

The gap is even more pronounced for women of color, with Black women earning 64 cents on the dollar, Latinas just 57 cents, and Asian American and Pacific Islander women just 52 cents. Moreover, the wage gap persists regardless of industry, within various occupations and across all education levels. (The challenge of closing the gender pay gap was discussed on a recent LexisNexis State Net webinar, which can be viewed for free here.)

“In the wake of the #MeToo movement, pay transparency laws began to crop up around the country,” writes Kelly Cardin, shareholder at Ogletree Deakins, in an October 2022 Law360 column. “These laws often require companies to post or disclose a pay range for available jobs and are aimed at closing pay gaps and ensuring private equity.”

The problem facing in-house counsel is that this legislative trend is accelerating quickly and is taking a variety of forms, making it difficult to have a clear handle on compliance.

“Pay transparency laws are proliferating in New York and across the country, resulting in a patchwork of laws that can be challenging for employers to navigate,” Cardin wrote.

In fact, the first sweeping state law to be passed governing pay equity took place in California back in 2015 — the California Fair Pay Act created a new standard of “equal pay for substantially similar work.” Then in 2021, California became the first state to require companies with 100 or more employees to report wage data by race and gender across 11 pay bands. The goal is to reduce gender pay gaps and make it easier to enforce equal pay laws already on the books.

Another landmark piece of state legislation on gender pay equity was Colorado’s 2019 Equal Pay for Equal Work Act, which went into effect at the beginning of 2021. The law requires employers to post the compensation range and a general description of all employment benefits in their job postings and prohibits employers from paying any employee a wage rate that is less than the rate paid to an employee of a different sex for substantially similar work (absent legally justified reasons). The law imposes fines of up to $10,000 per violation.

In addition to these pay disclosure laws now on the books in New York City, California and Colorado, the states of Michigan, Maine, Hawaii, Vermont and Minnesota have all enacted laws barring employers from preventing employees from sharing their salary information — or from retaliating against them if they discuss their pay package with co-workers. Other states such as Nevada, Alabama, Washington, Maryland and Oregon have adopted laws and regulations that prohibit employers from requesting salary information from job applicants.

To help in-house counsel navigate this patchwork of salary transparency laws, the Lexis Practical Guidance team created a Pay Disclosure Requirements for Job Postings State and Local Law Survey, which details the key provisions in state and local salary transparency legislation across the U.S. that are directed at private employers.

The survey identified six key elements of pay disclosure requirement laws at the state and local levels:

Employee Eligibility and Exemptions

Does the law refer to external applicants and current employees? What about promotion opportunities as well as non-promotion opportunities? Are certain employers exempt from the law, such as those with fewer than 15 employees? Are remote positions exempt from the requirements?

Required Information

How much detail is required to be posted? A general description of the pay scale? Is there specific application to bonuses, commissions or other forms of compensation? Is the offered employee benefits plan, such as employee healthcare or retirement plans, subject to disclosure requirements?

Timing and Triggering Events

What is the effective date of the law? What specific employee information requests must be granted by employers? Are there additional salary disclosure requirements that are imposed when promotion opportunities are announced?

Notice and Posting Requirements

What communication channels must be used by employers to notify employees and prospective employees of pay scales? May some job openings be kept confidential? Do the disclosure requirements apply to any third parties engaged by employers to recruit job candidates on their behalf?

Penalties

How much are the potential fines that can be imposed by state labor commissioners for failure to comply? Are there any mitigating circumstances that will be considered? Is there a private right of action for individuals to seek injunctive relief or other relief?

Other Key Provisions

Do employers have the discretion to post compensation ranges with wide gaps between the lowest and highest salary figures? Is there a good faith provision that allows employers to pay more or less than the posted range, based on extenuating circumstances? What, if any, specific records of job descriptions and wage rate history must be maintained by employers?

In-house counsel need to stay apprised of the latest legislative and regulatory developments governing salary transparency so they can mitigate compliance risk and provide the best possible counsel to their executive team. The Lexis Practical Guidance team maintains a Labor & Employment Key Legal Developments Tracker, which is updated daily with any important changes in the landscape of labor and employment laws in the U.S.

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