Pay Transparency and Disclosure Requirements Compliance Checklist

This checklist provides guidance on pay disclosure laws cropping up around the country.

One of the goals of these laws 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 of these laws is to help close the wage gap between women and men.

As these salary transparency laws proliferate coast to coast, the increasing patchwork of laws can be difficult to navigate. The problem facing employment lawyers is that this legislative trend is accelerating quickly and taking a variety of forms, making it difficult to have a clear handle on compliance. This checklist aims to simplify this compliance challenge for employment attorneys.

California’s Landmark Salary Legislation

The first sweeping state law to be passed governing pay equity took place in California with the California Fair Pay Act (applicable to employers starting on January 1, 2016).¹ It amended the California Equal Pay Act and created a new standard of equal pay for substantially similar work.

• Additional California pay equity laws
  • Salary history inquiry ban. In 2018, California prohibited employers from inquiring about prospective employees’ salary histories.²
  • Pay data reporting. 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.
  • Job postings. On January 1, 2023, California began to require employers to include compensation and benefits information in job postings.³

Pay Transparency in Job Postings

Below is a summary of states and localities that have laws on pay transparency in job postings.

• State and local laws on pay disclosure in job postings
  • Sample state laws. In addition to the law regarding salary disclosure in job postings in California, several other states, such as Colorado, Connecticut, Maryland, Nevada, New York (effective September 17, 2023), Rhode Island, and Washington, have laws on pay disclosure in job postings.
  • Sample local laws. Several localities, such as New York City, Albany, NY, Ithaca, NY, Westchester County, NY, Cincinnati, OH, and Toledo, OH, have corresponding pay disclosure laws on the books as well.

Laws Barring Employers from Stopping Employees from Discussing Their Pay

Below is a summary of states that have laws prohibiting employers from preventing their employees from disclosing their pay to each other.

• State and local laws on disclosure of wages between employees
  • Sample state laws. Many states, such as California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New York, Oregon, Rhode Island, Vermont, Virginia, and Washington,and the District of Columbia have enacted laws barring employers from preventing employees from sharing their salary information—or from retaliating against them if they discuss their pay package with coworkers.

Laws Barring Salary History Inquiries

Below is a summary of states and localities that have laws prohibiting employers from asking about prospective employees’ salary histories.

• State and local laws on salary history inquiry bans
  • Sample state laws. Many states, such as Alabama, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Nevada, New Jersey, New York, Oregon, Rhode Island, Vermont, and Washington, have laws that prohibit employers from requesting salary information from job applicants.
  • Sample local laws. Several localities also have prohibitions on inquiring about salary histories, such as San Francisco, CA, Kansas City, MO, New York City, Albany County, NY, Suffolk Country, NY, Cincinnati, OH, Toledo, OH, and Philadelphia, PA.

Navigating the Patchwork of Legislation

To navigate this patchwork of salary transparency laws, here are key elements of pay disclosure requirement laws at the state and local levels to consider:

• Employee eligibility and exemptions. Does the law refer to external applicants and current employees? What about promotion opportunities as well as nonpromotion 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 does the law require to post? 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 employers grant? Are there additional salary disclosure requirements that the law imposes when employers announce promotion opportunities?
• Notice and posting requirements. What communication channels must employers use to notify employees and prospective employees of pay scales? May employers keep some job openings confidential? Do the disclosure requirements apply to any third parties that employers engage to recruit job candidates on their behalf?
• Penalties. How much are the potential fines that state labor commissioners can impose 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 employers maintain?

Practical Steps for Employers

Employers should consider the following steps when handling pay transparency issues:

• Consider salary benchmarking. Applicants and employees will now be able to see if the employer’s salaries are at a similar level to competitive employers. To help ensure the employer’s pay is competitive, employers should consider engaging in salary benchmarking. The benchmarking should compare jobs by equivalent duties rather than titles. The benchmarking should also only include recent pay data (i.e., no more than six months old). It is generally helpful to hire an outside consulting firm to help conduct this benchmarking. They often have access to the most current, accurate, and relevant pay data.
• Review and create salary ranges/bands. After receiving salary benchmarking data, it will be necessary to review and create compensation bands at least every 6–12 months. These bands show a minimum, middle, and maximum compensation point for each level of each position in the organization. Developing set compensation ranges for each job level will help avoid pay equity claims and pay secrecy.
• Educate managers on compensation ranges, pay disclosure laws, and documenting employment decisions and performance. Managers must be aware of the pay transparency laws and the employer’s commitment to equitable compensation. Because applicants and employees will be more aware of the employer’s pay structures, managers need to be consistent in documenting hiring, promotion, disciplinary, and termination decisions. To help defend against potential pay discrimination claims, the employer will need to show there are legitimate reasons for any pay disparities between employees. Managers should avoid taking adverse action against applicants or employees due to their complaints about potential pay discrimination.
• Carefully review the pay transparency laws in all jurisdictions. As stated above, several jurisdictions have a variety of pay transparency laws with different requirements. To keep up with the different and developing laws, it will be helpful to review state and local law surveys on pay transparency by Lexis® Practical Guidance.
• Revise job postings. National or multistate employers may want to revise their job postings to be consistent with the most restrictive pay transparency requirements to ensure compliance. If a national employer wants to have one job posting that applies all around the country, the employer should consider crafting their job postings on compensation to meet the most rigid jurisdictional pay disclosure requirements. This way, the employer will not run afoul of pay transparency laws in any state or locality where they offer the job posting. Of course, companies can also opt to customize their job postings to the pay transparency requirements of each state or locality.
• Consider prohibiting salary negotiations. Sometimes applicants or employees are able to negotiate higher pay for themselves. These negotiations can sometimes take pay outside the set compensation bands and/or cause inequality between male and female employees’ salaries.
• Conduct regular pay equity audits. It is a best practice to regularly investigate pay equity at the organization. Some key steps in pay equity audits include the following:
  • Preserve attorney-client privilege and work product. Engage outside counsel, in-house counsel, and outside experts (e.g., statisticians) in writing to provide advice on the audit. The audit team should include only those individuals who are needed to help determine the legal analysis.
  • Compare the compensation of employees who perform the same or significantly similar work. To make this comparison and to avoid equal pay claims, consider pay scales, job descriptions, performance review procedures, and other factors influencing pay. These factors include length of time at the organization and/or in the industry, where the employees work, and their educational levels.
  • Conduct a statistical analysis on compensation between male and female employees. It is often helpful to hire experienced statisticians to conduct this analysis.
  • Take action to fix unjustified pay disparities. If the audit shows there are gender disparities in pay that are not explainable by legitimate factors (e.g., seniority), the employer must adjust the pay ranges so that male and female employees are receiving equal pay for equal work. The employer will also want to consider whether to remedy these pay issues retroactively.

Pay disclosure requirements will continue to proliferate and there may soon be similar legislation across many more states and localities. Stay apprised of the latest legislative and regulatory developments governing salary transparency to mitigate compliance risk and to provide the best possible counsel to clients.

Adapted with permission from an earlier version that first appeared on Legal Dive as “How in-house counsel can navigate pay disclosure laws.” 

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RESEARCH PATH: Labor & Employment > Screening and Hiring > Checklists

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