Wage Transparency Legislation Brings Unique Challenges and Benefits for Employers

One of the greatest challenges employers across all lines of business has experienced is recruitment. A talent pool shortage, applicant expectations, hybrid or remote work demands and more, compounded by economic uncertainty has made it difficult for employers to not only fill those open roles but also retain current employees. Radio has often successfully served as a medium to help organizations and businesses with their recruitment efforts.     

Colorado was the first state to pass a law requiring business to list salary ranges in job postings. Since then, additional states are adopting their own disclosure laws. RAB reached out to our partners at Foster Garvey PC to provide some guidance on wage transparency laws.

Contributors: Steven R. Peltin, Principal; Jared Van Kirk, Principal; Hannah Talmage, Associate – Foster Garvey PC

The growing trend of wage transparency legislation has complicated employer relationships with job applicants and employees. At the same time, these laws also can benefit employers.

Q: Which states and cities have wage transparency laws, and what do these laws generally require from employers?

There is a growing emphasis on open disclosure of compensation information and wage equality at the state and local level. States that currently have some form of wage transparency laws include California, Colorado, Connecticut, Maryland, Nevada, Rhode Island, and Washington state. Several cities also have wage transparency ordinances, including Cincinnati, Ohio; Ithaca, New York; Jersey City, New Jersey; New York City, New York; Toledo, Ohio; and Westchester County, New York. While the specifics of these laws vary, most require an employer to disclose the wage or salary range for a position when the job is posted.

For example, Washington state’s wage transparency law requires Washington employers with 15 or more employees to disclose in a job posting the salary range or wage scale containing the minimum and maximum compensation for the position. The posting also must generally describe benefits in the job posting. Washington’s law also applies to employers not physically located in that state if they have at least one Washington-based employee, or if the employer recruits for jobs that could be filled by a Washington-based employee.

Starting September 17, 2023, New York state will join this group. Under a new law, employers with at least four employees – plus employment agencies – must include the minimum and maximum salary or range of hourly wages for each advertised job, promotion or transfer opportunity. This law closely tracks the New York City Pay Transparency law that went into effect November 1, 2022. Like Washington, New York state’s law will apply to any job that can be performed within the state, thereby likely covering job postings for all remote work that can be done from New York.

Some of these laws have other significant provisions, including measures protecting an employee’s right to share salary information and limiting an employer’s ability to obtain salary history from applicants or use past salary history to determine compensation.

Q: What are some of the challenges that employers can face because of wage transparency laws?

  • Jurisdictional challenges. Even if an employer is not located or does not operate in a state or city with pay transparency laws, these laws may apply to current employees in other jurisdictions or to applicants in other states who might respond to job postings. As a result, employers may need to comply with the laws outside of where they do business or seek job applicants.    
  • Discrimination claims. Pay transparency may trigger discrimination allegations against employers, prompting disputes and potential litigation.
  • Employee tension due to pay inequities. Greater wage transparency also may reveal internal pay differences to employees. Such discoveries can create friction if current employees believe that they are being paid within a salary range they do not feel is commensurate with their service or experience, or that a newly hired employee could be paid more for performing similar work.

Q: What are some potential advantages for employers that comply with wage transparency laws?

  • Pathway to constructive dialogue. Pay secrecy policies can perpetuate hidden pay inequities if compensation data is kept secret. Pay discrepancies between employees are more difficult to identify and remedy, and are more likely to continue. Pay transparency laws ideally will reduce possible inequities resulting from historic bias based on factors such as gender, ethnicity and sexual orientation. Under these new laws, employees and applicants can discover how their compensation compares with their peers and with what other employers are offering. As a result, employees and applicants are better able to engage in more meaningful and fair discussions regarding their pay and therefore alert employers to pay issues that should be addressed.
  • A more stable, happier workforce. Employers who follow a compensation philosophy or guidelines that comply with wage transparency laws can gain an advantage in the market. Transparent communication to employees and applicants can build trust in leadership, lead to an increase in job satisfaction and increase employee retention.
  • Better benchmarking. Employers can research their competitors’ pay practices to determine whether their salary ranges and benefits are commensurate with their peers. However, employers should avoid any actual or perceived understandings with competitors to set wages or benefits at an agreed level to ensure they do not trigger antitrust risks.
  • More informed employees. Compliant employers can better explain their pay practices and thereby help employees to understand why their compensation may vary from other workers and learn what employees can do to increase their pay. 
  • Smoother employment negotiations. Wage and benefits disclosures can simplify negotiations with applicants and employees about compensation.

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