Employers Balance State Pay Equity Laws With Trump Anti-DEI Push

Businesses are weighing competing pay equity legal risks, as the Trump administration scrutinizes DEI efforts while states advance wage transparency laws that increasingly threaten to expose disparities.

Laws requiring companies to include salary ranges in job ads recently took effect in New Jersey and Vermont and will be implemented in Massachusetts in October. A Delaware bill awaiting the governor’s signature is also set to imitate transparency mandates that have in recent years spread from California to New York.

The measures—along with state and federal pay discrimination laws—have prompted employers to more routinely audit and adjust salaries to avoid racial and gender wage gaps that could trigger litigation. But the wave of new Trump administration policies restricting diversity, equity, and inclusion programs has some employers worried pay equity efforts also could become targets of federal regulators.

State pay transparency laws “are doing what the authors intended them to do. They’re forcing companies to take a hard look at their compensation structures,” said Sheila Abron, attorney with Fisher Phillips LLP in Columbia, S.C.

Since Colorado launched the first job ad pay transparency mandate in 2021, the laws’ spread has emboldened workers to ask their supervisors why they’re seeing advertised pay ranges higher than their own salaries. This dynamic raises the risk of pay discrimination lawsuits against employers under the Equal Pay Act, Title VII of the 1964 Civil Rights Act, and other federal and state laws.

Businesses have raised questions and concerns this year about the possible impact of Trump’s DEI policing on their growing pay equity programs, according to several lawyers who advise employers on the issue. But demand for pay equity audits remains strong so far, they say.

“To the extent you’re trying to determine what’s unlawful DEI, you have to understand that how and why you’re doing your pay equity audits could fall into that bucket of unlawful DEI,” said Lynne Anne Anderson, an attorney at Faegre Drinker Biddle & Reath LLP in New Jersey.

She said she tells clients voluntary audits of their private workforces shouldn’t imitate the audits that companies with federal contracts previously had to conduct under Executive Order 11246, which President Donald Trump recently revoked.

“If you’re doing your audit to advance pay for certain groups at the detriment of other groups, without regard to whether that’s fair to all groups, that’s going to be a problem,” Anderson said.

Different Buckets

Trump has taken a broad swipe in his second term at DEI programs that his administration deems discriminatory under Title VII. It’s clear his administration disfavors racial or gender preferences such as hiring quotas or goals, but it’s less obvious how far the president’s definition of “illegal” DEI stretches into areas such as diversity training and pay equity.

Employers “still understand the value of pay equity and are still doing the audits,” Abron said. “Pay equity analysis shouldn’t be just for women or just for minorities. We really should be looking at inequities across the board, because the laws on these are neutral.”

Thus far, Trump’s executive orders on DEI and related policy announcements from the Equal Employment Opportunity Commission haven’t specifically addressed pay equity, said Stacey A. Bastone, an attorney at Jackson Lewis PC in New York.

“I wouldn’t bucket that together with the other things this administration is focused on,” she said, but added that employers should think carefully about their approach to pay audits and adjustments to ensure they aren’t considered discriminatory.

Bastone advises companies to have legal teams lead their pay equity audits, rather than task a DEI team with running those efforts.

This protects the results of the audit under attorney-client privilege, although in some instances a court could still order them disclosed as part of discovery during a pay discrimination lawsuit.

Trump, within hours of returning to the White House in January, ordered federal agencies including the Justice Department to launch investigations of illegal, discriminatory DEI programs including in corporate America.

His executive orders also required that federal contractors certify they aren’t operating illegal DEI programs, under threat of False Claims Act prosecution if their certifications aren’t true. Attorney General Pam Bondi ramped up the threats in a memo that suggested criminal prosecutions for some DEI efforts.

‘Compliance Tool’

State job ad laws are the latest policy attempt to combat persistent wage gaps by giving job seekers and employees more information to better negotiate and avoid being underpaid.

US women workers in 2024 were paid an average of 85 cents for each dollar that men made, according to a Pew Research Center analysis of government data.

Beyond the states and cities mandating pay ranges in job ads, three more require employers to give job applicants a wage range upon request or at a specific point in the hiring process.

Some states ban employers from demanding a job applicant’s salary history, attempting to prevent below-market pay rates from following a worker from one job to the next. And some specifically block employers from penalizing workers who talk with their supervisors or colleagues about how much they’re paid.

President Joe Biden proposed a nationwide pay transparency mandate covering federal contractors in January 2024, but his administration withdrew the proposal just before leaving office a year later.

Even as Trump amps up DEI scrutiny though, the risk that pay equity efforts will attract federal ire is probably less dangerous than letting potential pay disparities go unchecked in the workforce, said Lulu Seikaly, senior corporate attorney at Payscale Inc., which provides employers with compensation data software.

Trump’s orders haven’t changed the statutory requirements in Title VII or the equal pay measures in other federal and state laws, she said.

“At the end of the day, paying people equally is the law,” Seikaly said. “Conducting those pay equity audits, to us, should be framed more as a compliance tool.”

(An incorrect AI summary previously at the top of this story was removed.)