Pay Transparency Emboldens Workers as Companies Strive to Comply

A wave of state and local salary transparency laws is sparking worker pushback as current employees protest discrepancies between their pay and the range offered in job ads for similar new positions.

The laws, adopted in a handful of states such as California, Colorado, and New York, are aimed at combating the gender pay gap and other forms of pay discrimination by giving job seekers greater bargaining power stemming from increased compensation information during the hiring phase.

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Salary transparency is a key determining factor for which jobs applicants apply and where, employment law attorneys say.

But at the same time, the laws are armoring existing employees with compensation information to help evaluate whether they are being paid fairly, attorneys say.

And those concerns could expose companies to legal actions for pay discrimination if they aren’t properly addressed, attorneys said.

“We’ve been spending a lot of time on this,” said Lynne Anderson, a partner at Faegre Drinker Biddle & Reath LLP who leads the firm’s pay equity team.

“What these laws drive companies to do is to be prepared to answer employee questions regarding how their peers are being paid in comparison to them,” she said. There may be several factors “driving that differential,” she said.

Wide Ranges

As more companies disclose pay ranges in job listings, several have shared significantly wide ranges that make it difficult for job seekers to approximate the amount they’d likely receive.

Employers are still figuring out how to strike the right balance, said Amy Leschke-Kahle, a vice president at payroll and human resources firm ADP Inc.

Posting too big of a range in job ads can worsen the tensions with existing employees who might feel they’re underpaid and confuse job applicants who later learn it’s an entry-level position on the low end of the advertised range.

“They’re still posting wide ranges to make sure that they meet the requirements but also to give them the biggest chance of getting applicants,” she said. Some employers have noticed a decrease in the number of job applicants for each position, perhaps due in part to the advertised salary ranges, Leschke-Kahle said.

In addition to California, Colorado, and New York, Washington state has adopted a pay transparency measure, and similar laws are set to take effect Jan. 1 in Hawaii and a year later in Illinois. The Massachusetts legislature is close to passing its own bill, while Washington, D.C., is considering a broad pay equity proposal that includes transparency in job ads.

These types of laws arguably reached a critical mass this year by taking effect in the major economic centers of California and New York. They apply to a host of employers because, in many cases, companies advertising jobs that could be performed in those states still must comply, even if they have little physical presence there.

The effects of pay transparency laws are also bleeding into states that haven’t yet enacted such a mandate, attorneys said.

Larger companies with significant hubs in California and New York, for instance, are adopting a nationwide compliance approach “given the nuances in each jurisdiction’s laws” and the challenge of adhering to all statutory requirements, said Maria Papasevastos of Seyfarth Shaw LLP.

The increasing adoption of remote work is also a key factor behind this approach, Papasevastos said.

‘Uniform Approach’

Companies are taking a “uniform approach across the organization, even if this means over compliance in other areas,” said Laura A. Mitchell, a principal at Jackson Lewis PC.

“What we have seen is companies thinking thoughtfully about their approach to compliance” because there’s also “a need to put the best foot forward and ensure they’re attracting top talent,” said Mitchell, who focuses her practice on data analytics, including pay equity. “There’s been lot of dialogue around this.”

Canam Steel Corp. is one such company. The steel product manufacturer is navigating the varying requirements of each state and local pay transparency law, generally by choosing one relatively expansive mandate and applying that to all US job ads, said Ron Peppe, Canam’s executive vice president in charge of HR and legal matters.

“The tough part is keeping up with the different rules and requirements in so many different states, when almost every job search we have is national,” he said.

The business employs about 1,200 people, including 200 to 300 office and administrative staff who can work anywhere in the US, plus the employees at its factories in six states.

“It creates some practical problems, and you end up having to take sort of a lowest-common-denominator approach,” Peppe said.

To avoid potential liability for pay discrimination involving current employees, Anderson and other attorneys urged businesses to evaluate their pay scales, make adjustments where needed, and identify the legitimate business reasons for differing pay amounts.

“What we find when we do these audits is you may have people that are placed within a certain salary range that probably shouldn’t be there, because the actual job they’re performing doesn’t align with the job description that’s been assigned to them or the job title,” she said.

“So that’s why you see companies tweaking or updating job descriptions, or perhaps putting people into different pay grades or salary ranges, because the job they’re actually performing is better aligned with a different job description or job title or pay range,” Anderson said.

Bonus Transparency

The bigger-picture goal of ensuring equitable pay—both for new hires and existing employees—will take more time for many companies.

But the transparency laws are nudging them in that direction, attorneys said.

Adding a pay range for bonuses is poised to be the next phase of the broader movement for salary transparency, said Seher Khawaja, a senior attorney for economic empowerment at Legal Momentum, who helped draft local and state-wide salary transparency laws in New York.

Some state laws already address what information about compensation and benefits employers must disclose to workers.

But while bonuses are a form of compensation that’s not guaranteed, Khawaja said there should be more specificity in job postings.

Workers “should get a range for any additional form of compensation,” she said.