Expanded pay transparency laws in California and Washington state take effect Jan. 1, adding steam to a growing movement to regulate the way companies set and advertise salary ranges across the country.
The two laws are the newest to require employers to include a salary range in job ads, joining a 2021 Colorado law, a New York City ordinance that took effect Nov. 1, plus a handful more local ordinances already in force. New York Gov. Kathy Hochul (D) also signed a similar transparency measure on Dec. 21 that will take effect statewide next fall.
With economic engines such as California and New York City now covered by these disclosure laws for job seekers, multi-state businesses face increasing pressure to establish and publicize salary ranges for all their US jobs rather than figure out compliance on a case-by-case basis.
“More and more employers are looking for ways to ease their administrative burden, especially large employers where they also have PR-related concerns, optics-related concerns,” said Christopher T. Patrick, an employment lawyer with Jackson Lewis PC in Denver. “Leaning into transparency can be good for business and reduce the burden related to compliance with a national strategy.”
Several major companies including Alphabet Inc.'s Google, Citigroup Inc., IBM Corp., and Microsoft Corp., have announced they’ll publish salaries with all US job postings.
Others have attempted to circumvent the purpose of transparency rules by deflating their advertised salary ranges to hold down the pay expectations of job candidates and existing employees or by providing pay ranges too wide to be useful.
While the Colorado and New York City measures were designed to be enforced primarily by state or city agencies, the California and Washington state laws provide private causes of action that create a risk of lawsuits against employers, Patrick said. The New York City ordinance also allows worker lawsuits alleging violations, but only by a company’s existing employees, not job applicants.
“For that reason, California and Washington might bring a different level of risk,” he said.
Thus far, most of the enforcement in Colorado has taken the form of warnings from the state’s labor department and waiver of any penalties if the company corrects the problem, he said. But Patrick added that he is working with one business now that’s facing financial penalties for alleged violations.
Fighting Wage Gap
The job ad requirements are lawmakers’ latest attempt at increasing pay transparency to fight pay discrimination that intentionally or unintentionally leads to women and workers of color making less money than White, male counterparts in similar jobs.
A handful of other states, including Connecticut and Nevada, require employers to disclose salary information to job candidates at later stages of the application and interview process. A similar requirement takes effect Jan. 1 in Rhode Island.
State lawmakers also have chipped away at the wage-gap issue over the past decade by banning employers from requiring that a job applicant share their prior salary history and ensuring workers can’t be fired for talking with coworkers about their pay.
“Pay transparency is important to eliminating gender-based pay discrepancies,” said Celeste Monahan, an assistant director in the Washington State Department of Labor & Industries, in a statement announcing policy guidance for the state’s new law.
The new California law, in addition to its job ad provisions, also expands on requirements for large companies to report pay data by race and gender to the state.
Anne B. Sekel, an employment lawyer with Foley & Lardner LLP in New York, said she’s already hearing from a few employers wanting to establish a nationwide strategy that complies with the most restrictive state or local pay transparency law.
“That’s really embracing the trend, but I think ultimately companies that do that are going to save themselves time and money because they aren’t going to have to scramble to be reactive to laws that are going to come up,” she said.
But establishing a single policy for advertising a company’s US jobs isn’t a simple task, as the details of pay transparency laws vary by state. New York City and California only require a salary range, for instance, while Colorado and Washington also require information about benefits and other compensation.
In another key difference, Colorado and New York City seem to require a good faith estimate of what the employer plans to pay for a specific job opening, Patrick said. But Washington’s guidance indicates the state’s enforcement agency wants companies to provide the full salary range available over the lifespan of a job, not just at the time of hiring, he said.
“Those disconnects make it hard to be an employer,” he said. “There are areas where if Washington requires a broader range, while Colorado and New York require a more narrow range, it’s hard to have a uniform practice.”
The laws have an especially broad reach for companies looking to hire geographically dispersed or remote workforces. The New York City ordinance, for example, covers any company with at least four employees and at least one of them in New York City.
“These laws are written so that if you have someone who’s working remotely, if the job could be performed by someone in Colorado or New York City, you have to scratch your head and say, ‘Am I subject to this law?’” Sekel said.
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