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Good Counsel: How We Talk About Pay Is Changing. Don’t Fight It

Sept. 26, 2022, 9:00 AM

My mom used to tell me to never tell anyone at work about how much I was being paid. Times have changed.

There’s a marked shift toward pay transparency on the job, as evidenced by a series of state and local laws passed in the last several years. The trend is colliding with the rise of remote work and employee mobility, creating a tangled web for employers.

New York City’s broad pay transparency law that goes into effect in November, for example, requires that job advertisements include a specific anticipated salary range. The law covers all employers with four or more employees. Any open position that could be performed even part of the time in the city. This is one of at least four different pay transparency laws just within the state of New York.

Similar laws are also on the books in Colorado and Washington. Legislation passed by the legislature in my adopted home state of California would require employers with 15 or more workers to disclose salaries or hourly wages in job postings.

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Getting ahead of this trend is critical if you want to build trust with your employees and avoid costly litigation.

The first order of business is setting up time with your head of HR and head of recruiting to talk about what the world will look like in five years, and how your company can build trust with employees by getting there early.

Some GCs might be thinking that employee morale is an HR issue. They’re right. But low levels of workforce morale often translate into legal issues. Smart GCs can avoid problems down the line by understanding legal trends and using that knowledge to help HR.

One obvious issue coming out of all this transparency is that, with inflation and the “Great Resignation,” wages are rising. You may need to offer new employees more than what you’re paying your existing employees. Current employees who see the job advertisement will wonder why they’re doing the same work for less, which sows distrust and anger.

While it’s obviously not illegal to pay new employees more than existing employees, it’s also not smart. An underpaid employee may ascribe some bad ulterior motive to the financial slight (their race, their sex, their gender), and we all know where that ends up.

General counsel need to embrace pay transparency before it’s forced on them. Trying to avoid jurisdictions that don’t require pay information is a losing battle, particularly in a world of remote work.

It’s time to consider three steps.

First, if you haven’t done a pay audit to identify potential pay inequities recently, now is the time. It’s important to do this audit under privilege—audits like this are two-edged swords that can be used against you if not privileged, particularly if you don’t act quickly to address disparities.

The audit may also reveal pay disparities among your most valued longer term employees. Correct them now.

Imagine the power of going to an employee, telling them that you voluntarily did an audit and have decided unilaterally to give them a raise simply to ensure that they are paid fairly in light of current market conditions.

Second, it’s increasingly difficult to avoid legally mandated pay transparency, so embrace it and take credit for being a leader in the space. Sit down with your head of recruiting and HR, and agree on pay information that should be in all job postings even if that information may not yet be required in all jurisdictions. Use this as an opportunity to build trust with your employees.

Finally, develop guidelines around salary negotiation with new hires.

Nearly half of the states restrict an employer’s ability to ask an applicant about salary history, recognizing that using past salaries to set current salaries has the potential to perpetuate inequities. Implement a companywide policy that your recruiters will never ask for such information. Set salaries for new employees that are based not on a candidate’s ability to negotiate, but on how much you pay current employees to do the same work.

Rob Chesnut is the former general counsel and chief ethics officer at Airbnb. He spent more than a decade as a Justice Department prosecutor and later oversaw US legal operations at eBay. The author of “Intentional Integrity: How Smart Companies Can Lead an Ethical Revolution,” Rob consults on legal and ethical issues.

To contact the editor responsible for this story: Chris Opfer at copfer@bloomberglaw.com