New Pay Transparency Laws Your Company Must Know

If it seems like talking about potential salaries or previous salaries with candidates has gotten more complicated — and potentially problematic —  you’re not imagining things.


Across the country, a growing patchwork of state and municipal laws now target pay discrimination in ways that affect companies nationwide. Most recently, this effort includes requirements for businesses to disclose salaries in job listings, during interviews or when asked. But it also extends to preventing employers from asking applicants about pay history and protecting employees’ rights to discuss pay rates. Owners of large and small businesses would be wise to pay attention — even when their states have no such laws — or risk inadvertently breaking the law.


State & Local Pay Transparency Laws

“At this time, states—not the federal government—are generating the most important legislation in this area,” says attorney Stephen Fox, a partner in Sheppard Mullin’s Labor and Employment and Business Trial Practice Groups in Dallas. “On one hand, pay equity laws are designed to prohibit employers from doing something — that is asking about salary history. On the other hand, they also force employers to provide, in job postings, salary information to job seekers and employees. The laws cover, if you will, both sides of the same coin.”


Although they vary in reach and scope, pay transparency laws are now on the books across the country and may apply whether your company is based there or not. Employers subject to these statutes may have to disclose salary ranges in job listings, during interviews or when candidates ask. They also may be required to ensure all existing employees are aware of new job openings and their pay ranges, regardless of existing employees qualifications or interests.


The National Women’s Law Center estimates that more than a quarter of the U.S. labor force is now covered by pay transparency legislation. Laws vary at the county, city, and state level and are also changing rapidly across the US. Regardless of where your business is located, it’s important to be familiar with the laws and ensure no one breaks them.


A Proven Way to Fight Pay Inequality

Research shows these wage history and pay transparency laws increase pay equity and reduce gender and racial wage gaps. Women earn roughly 82 percent as much as male counterparts, according to a recent Pew Research Center analysis, while minority workers also face significant pay gaps.


Restrictions on discussing salary history are seen as a way to help ensure that lower-paid workers are not locked in at lower salaries, while pay transparency provides a way for applicants and employees to know whether they are in the same pay range as their peers.


Pay Transparency Compliance Confusion

As these laws are enacted state by state and city by city, businesses of all sizes and in different locations face a daunting compliance task. Even businesses located in states without pay transparency laws must be vigilant. Colorado’s Equal Pay for Equal Work law, for example, applies to any company in the United States that has at least one worker in Colorado or may be trying to fill an opportunity with a remote or in-person worker in Colorado.  Colorado’s law requires employers to disclose—in every notification of a job or promotional opportunity in Colorado—the hourly or salary compensation or range and a general description of the benefits and other compensation associated with the opportunity. And this requirement applies whenever a Colorado employer posts a job on platforms such as LinkedIn or the employer’s website. But, there are geographic limits to the posting requirements. The rules state that the compensation posting requirements do not apply to jobs to be performed entirely outside of Colorado or postings entirely outside of Colorado. Therefore, if an employer runs an advertisement in a newspaper with a circulation entirely outside of Colorado, the posting requirements do not apply, even if the posting is for a job to be performed in Colorado. However, if the job is posted on LinkedIn which can be accessed within Colorado and outside of Colorado, the requirements would apply to such postings, but not if the job is to be performed entirely outside of Colorado.


“The biggest challenge for employers is that each state’s laws are different,” says Fox. “In advising clients, we have begun to recommend that if they have a nationwide applicant pool, they should strongly consider complying with the strictest or most onerous state law and do it uniformly no matter where the job is performed or the applicant comes from.”


Benefits of Pay Transparency

Some employers have been reluctant to embrace pay transparency out of fear that it gives job candidates an upper hand in negotiations or can cause discontent amongst current employees. Others are skirting the spirit of pay transparency laws by posting job openings with an extremely wide or low salary range.


Of course, businesses that fail to follow pay transparency laws face risks of government audits, investigations and civil fines. But instituting pay transparency policies carries additional benefits. You can ensure your company remains competitive in attracting candidates. After all, 40 percent of all job listings now come with pay ranges. Pay transparency can result in improved candidate quality since job seekers are much more likely to apply to jobs with posted salaries. It may also increase employee morale and motivation. And, last but not least, your company will be doing its part to ensure fair and equitable compensation for everyone.


Navigating the Compliance Landscape

The biggest mistake a business can make is to not pay attention to the rapidly changing legal and compliance landscape. Therefore, proactive steps are recommended for many businesses. Staying up to date is the most effective way to stay compliant. A good source for the latest information on pay transparency and salary history laws is the Society for Human Resource Management (SHRM), a law firm with expertise in employment law, or an experienced recruiting agency.


Feel overwhelmed by new legislation affecting your company’s recruiting efforts? Reach out today for clarity.

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