Pay transparency laws the latest trend in advancing goal of pay equity

Businessman writing "Equal pay" on virtual screen with blurred office background.

Over the past few decades, pay equity has remained at the forefront of legislation affecting employers. At the federal level, the Equal Pay Act of 1963 prohibits wage discrimination based on sex, and the Lilly Ledbetter Fair Pay Act of 2009 extended the timeframe for employees to assert claims against their employers for alleged discriminatory pay practices. With increasing frequency, states, counties and cities continue to enact laws that further the goal of pay equity for all by, for example, prohibiting wage discrimination based on other protected characteristics and prohibiting employers from asking questions regarding wages earned by applicants with previous employers. The fight for equal pay has even garnered heated debate from the public through lawsuits like the one brought by the U.S. Women’s National Soccer Team against the U.S. Soccer Federation, Inc.

Now, pay transparency laws appear to be the newest trend in advancing the pay equity conversation. Although the requirements set forth in pay transparency laws enacted throughout the country do vary, one common denominator between these laws is the requirement that employers disclose a position’s salary/hourly wage (and, in certain circumstances, benefits) to applicants during the hiring process. At the time of this writing, Colorado, California, Illinois, Washington, New York, Nevada, and Rhode Island have passed laws that require employers to disclose this financial information in job postings or at some point during the hiring process. Certain cities in New York, New Jersey and Ohio, among others, have enacted city ordinances with similar requirements. A review of pending legislation throughout the country also shows that the number of states with pay transparency laws will likely increase, given the number of states currently introducing and considering this type of legislation.

Considerations for employers

With this ever-changing landscape, here is what employers should keep in mind:

  • Employers operating in states, counties, and/or cities with pay transparency laws should quickly ensure their compliance with each applicable law’s requirements. Employers must also ensure that their remote hiring practices do not trigger states’ pay transparency laws. For example, New York’s pay transparency requirements apply to postings for jobs that are physically performed (at least in part) within New York, as well as postings for jobs that are physically performed outside of New York but will report to a supervisor, office, or other work site within New York. Washington likewise has enacted a pay transparency law with an expansive reach.
  • Because these disclosure requirements may expose differences in pay between similarly -situated employees, employers should conduct an audit of the wages (including base salary, bonuses, benefits, and more) provided to employees. Conducting this audit ensures that the employer is complying with equal pay laws and, in turn, is mitigating risk of claimed equal pay violations and discrimination.
  • Even where an employer is not subject to laws requiring certain pay disclosures in job postings, employers should determine whether affirmatively providing this information to applicants is in the best interest of their business. With other employers disclosing this financial information in job postings (whether by requirement or by choice), employers who do not disclose such information may lose out on job candidates who instead choose to apply with employers who provide greater pay transparency.