New Pay Transparency Laws Challenge Employers Across State Lines

I was once taught that it was rude to talk about salary, or, really, anything related to money. Now, scrolling through social media, I regularly see posts about pay transparency, showcasing people discussing their compensation in front of the whole world.

Though employees have long had the right to discuss their compensation with colleagues, many remained in the dark about their employers’ pay practices. Pay transparency laws are changing that.

Each pay transparency law is unique—in states that currently have them—which makes compliance challenging for employers. Companies should ensure they understand which laws apply to them, as well as the laws’ specific requirements.

Some of these laws require employers to post salary ranges in job advertisements, thereby publicizing what an employer intends to pay for a certain position and resetting applicants’ expectations about seeing salary disclosures in job postings. The laws have given employees insight into employers’ pay ranges and revolutionized the way employees talk about pay.

Not all states have adopted pay transparency laws, but we will continue to see them spread across the country this year. These laws can create compliance challenges for employers—as they are nuanced and differ slightly from each other state by state. They also present an opportunity for employers to put their best foot forward with respect to compensation, and to adopt and implement pay philosophies that can help recruit and retain top talent.

Earlier this month, pay transparency laws went into effect in Illinois and Minnesota. New Jersey, Vermont, and Massachusetts have laws scheduled to take effect later in the year.

These states join Colorado, California, New York, Washington, Hawaii, Maryland, Nevada, Washington, D.C., and other jurisdictions in having requirements for pay range disclosures. Given this new wave of laws, employers should reevaluate their existing pay transparency practices and policies to determine whether any need updates.

For example, Illinois’ law has a promotional opportunities requirement instructing employers that if they choose to publish a job posting externally, they must inform all current employees of the opportunity for promotion. This requirement is similar to a requirement in Colorado (though Colorado, which adopted the country’s first pay disclosure law in 2019, has many other unique requirements).

Given these nuances, it’s critical that employers stay current on the latest developments. Several states issued guidance interpreting their pay transparency laws, which often provide helpful compliance tips.

This year, pay transparency will take hold in the Midwest as the laws in Illinois and Minnesota take effect. Until recently, pay transparency laws proliferated primarily in coastal states, such as California and New York.

Employers should ensure they have established ranges for Midwest locations, given that compensation can, in some instances, depend on geography. Because salaries in the Midwest region might be lower than a company’s salaries in New York City, for example, this could result in a wider range of salaries and compensation being available to applicants and employees. Thus, to the extent employers haven’t done so already, they might want to examine their pay practices on a nationwide basis to ensure integrity in compensation ranges.

Failure to comply with pay transparency laws has repercussions. In most states, employers can face civil penalties or fines. Some jurisdictions have a cure period that allows a company the opportunity to bring the posting into compliance before an agency assesses any fines. Most states seem to be enforcing their pay transparency laws in a manner aimed at coaching employers into compliance, rather than in a punitive fashion.

Employers in Washington state, however, are held to significant consequences for non-compliance. Washington’s pay frequency law provides the opportunity for individuals to assert, on a class action basis, claims that a company hasn’t complied with the state’s pay transparency law.

Some Washington employers have defended against class actions brought by applicants who allege the company didn’t comply with pay transparency requirements and seek to recover statutory penalties. Washington employers should take particular care to comply with applicable requirements.

Generally, failure to adhere to pay transparency laws might affect the quality or type of candidates that respond to a job posting. As the pay transparency movement has gained traction, more applicants expect to see job postings with a pay range. Failure to have a range in a posting could discourage some candidates from applying, particularly if they can see what one company is paying for a position, but not another. Applicants might also draw inferences about compensation and company culture from postings that don’t contain disclosures.

Pay transparency is here to stay—at least for now. While these laws present compliance challenges, they also provide employers with an opportunity to attract talent by promoting visibility and showcasing attractive benefits and other perks of employment. If employers want to remain competitive in recruiting, it might be prudent to adopt a pay philosophy that signals to candidates that the company invests in its employees.

With new laws taking effect, this year presents an opportunity for employers to reassess their pay structure and practices. Many employers have already gone through the exercise of establishing ranges and conducting pay equity audits.

These steps are key to ensuring that salary range disclosures go smoothly, particularly in locations where employers might not have previously been making pay range disclosures.

Employers might also want to revisit the ranges they have posted in existing job advertisements, especially ranges in any evergreen postings, to ensure they comply with the requirements of the new laws and reflect the current pay range for the position.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Kelly Cardin is shareholder attorney at Littler and represents employers in a range of employment-related disputes.

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