Bracing for the effects of new wage transparency laws across the country

A boardroom is seen in New York City, New York, U.S., June 3, 2021. REUTERS/Andrew Kelly

December 2, 2022 - Every few years, state and local legislatures across the country tend to hone in on a particular hot topic or two relating to employment law and the workplace. Over the past decade, this has included paid sick leave laws, so-called "ban the box" laws, and laws that bar employers from inquiring about a job candidate's salary history. The latest trend in this line of employment law hot topics is wage transparency laws, which have most recently been enacted in New York City and California.

Generally speaking, wage transparency laws require employers to disclose on job applications the anticipated pay range for the role at issue, as well as potentially other compensation- and benefits-related information. The New York City law, for instance, which took effect on Nov. 1, 2022, requires that virtually all internal and external job postings include the minimum and maximum salary/wage rate that the employer "in good faith" believes it is willing to pay for the advertised job, promotion, or transfer opportunity.

The New York City Commission on Human Rights — which will enforce the new law — has taken the position that the new job posting law applies to any advertised role that will or can be performed in New York City. In other words, fully-remote roles — i.e., roles that can be performed from any location — are likely covered by the law, even if the employee does not have a physical presence in New York City.

In passing this law, New York City joins a growing list of states and cities that have passed similar laws that require the inclusion of salaries in job advertisements/postings or the furnishing of salaries to applicants/employees.

Colorado started the trend in 2019 (though the law went into effect in 2021), with a law requiring that employers (1) make "reasonable efforts" to announce all opportunities for promotion to all current employees on the same calendar day and prior to making a promotion decision; and (2) disclose in each posting for each job opening the hourly or salary compensation, or a range of the hourly and salary compensation, and a general description of all of the benefits and other compensation to be offered to the hired applicant.

Since then, California, Connecticut, Maryland, Nevada, Rhode Island, and Washington have passed similar laws. So too have Ithaca, N.Y.; Jersey City, N.J.; Westchester County in New York; and Toledo and Cincinnati, in Ohio.

While these laws are considered to be a step toward wage equality, they add administrative complications for many employers — particularly those with operations in more than one geographic location.

As employers begin navigating these new waters, here are some tips and considerations.

(1) Determine scope. Particularly with the rise in increased remote work, wage transparency laws can create confusion regarding when and where transparency is required. Determine how your company intends to respond — will you voluntarily elect to share wage information even on postings that might not require it? Doing so may help with recruitment and retention, but it could also open the door to questions that the company needs to be prepared to address.

(2) Prepare for (and preempt) scrutiny. Wage transparency laws require employers to take a hard look at their current practices to determine whether wage disparities and inequities exist between employees in comparable roles. Companies should conduct wage audits to determine where these disparities might exist so that they can take steps to remedy those concerns now, and be prepared to take steps to address any other issues that the audit reveals.

(3) Develop an internal roll out plan. Wage transparency laws will undoubtedly trigger discussions internally about compensation structures. While water-cooler-talk about wages is nothing new, employers must be prepared for these conversations by preemptively discussing what steps the company is taking to review and address questions about compensation levels. Make sure that the company's managers and human resources staff have the resources they need to answer tough questions from employees, as well as applicants. Ensuring that managers understand how compensation decisions are made at the company can help address tensions within your current staff. Many employers should consider whether additional training is needed to prepare managers to have these discussions.

(4) Conduct benchmarking. Increased transparency into compensation structures allows companies to determine where their pay and benefits structures stack up against major competitors and to make changes to recruit top candidates.

(5) Get templates ready. Most laws require a disclosure form that is provided to the candidate at some point in the recruitment process. For example, the Colorado wage transparency law requires employers to provide a description of all benefits that will be available to the selected candidate in the job posting. This includes a summary of health insurance, retirement benefits, paid days off, and any tax-reportable benefits. Nevada, on the other hand, requires the disclosure of the wage or salary range for the position after the individual has completed an interview. Having template documentation handy, therefore — and reviewed by legal counsel — will position human resources personnel to be on the frontlines of these new changes.

(6) (Re-)focus on intangibles. Not all employers are able to pay top dollar when recruiting candidates. In this case, job descriptions should focus on the intangible factors that make the company a place where candidates want to work. Factors like the mission of the organization, work-life balance, flexibility, remote working opportunities, and other benefits can make a big difference to many candidates.

(7) Document decision-making. When changes are made to the compensation structure to a particular position, be sure to document why those changes are being made contemporaneously. This will help address questions later.

It is uncertain how many jurisdictions will pass wage transparency litigation in the coming years. Still, proactive and prudent employers — regardless of whether they are located in one of the jurisdictions impacted by these laws — should take a hard look at their compensation practices now to ensure that any wage disparities are preemptively addressed.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Westlaw Today is owned by Thomson Reuters and operates independently of Reuters News.

Mark Goldstein is a partner in Reed Smith's labor and employment group in New York. His practice is focused on helping companies in New York and around the world manage their workplace needs, and he counsels clients on a variety of day-to-day and big-picture workplace issues. He can be reached at MGoldstein@reedsmith.com.

Mariah McGrogan is an associate in the Reed Smith's labor and employment group in Pittsburgh. Her practice is focused on representing employers in a variety of employment-related disputes. She can be reached at MMcGrogan@reedsmith.com.