This article originally appeared in Law360 on June 10, 2022, and is republished here with permission.
New York City passed a law on Jan. 15 requiring certain employers to disclose salary ranges in connection with advertising positions and considering applicants for employment. As passed in its initial form, the New York City Pay Transparency Law left open a number of questions about key requirements, some of which were addressed in a recent amendment passed on May 12. In terms of timing, the amendment delayed the effective date of the law until Nov. 1.
Notwithstanding the city's attempted clarification, coupled with its additional guidance discussed below, aspects of the law remain unsettled.
New York City's action follows a consistent, general national trend, primarily through legislation at the state level, toward requiring transparency about what a candidate can expect to earn if hired, promoted or transferred.
While pay transparency has existed in certain industries in both the private and public sectors for some time, this national legislative trend sweeps up many employers for whom it is a foreign, and potentially unfavorable, concept.
Some employers may disfavor the practice from a negotiating perspective, on top of the additional administrative burdens that come with this change. Moreover, even in jurisdictions that currently lack pay transparency mandates, employers should not be surprised to see companies shift to voluntary disclosure as industry trends evolve.
In the past handful of years alone, legislators have enacted pay transparency requirements in states such as California, Colorado, Connecticut, Illinois, Maryland, Nevada, Rhode Island and Washington. Additionally, other states are considering legislation that would require some degree of pay transparency. Indeed, an analogous law at the state level in New York is currently being reviewed by Gov. Kathy Hochul.
These jurisdictions differ in their particular disclosure requirements, with some yet to take effect, but they all serve the same objective of promoting pay equity by identifying a compensation range before the employer interviews or considers candidates, when certain biases could come into play.
Employers with multistate operations should review what is required based on their particular operations.
The newest of these laws amends the New York City Human Rights Law to make it unlawful for an employer to advertise a job, promotion or transfer without including the minimum and maximum salary for the position in the posting. It covers any employer with four or more employees located in New York City, regardless of where the employer is based.
While independent contractors are included in determining whether an employer is covered by the law, temporary positions advertised by temporary staffing agencies are not. As a result, employers should closely examine the contractual relationships they have in place leading up to the effective date of the requirements, as well as any remote work arrangements with employees who work in New York City, to determine whether they are covered.
The employer's specific obligation is to post the "lowest to the highest salary the employer in good faith believes at the time of the posting" for a particular position. The post must include the base annual or hourly wage rate of pay, regardless of how the employer sets the compensation terms.
An employer may identify other forms of compensation such as insurance benefits, paid time off and the like, but such disclosures are not required.
Open-ended salary ranges are prohibited because they undermine the law's purpose. Employers may, however, identify a finite amount, as opposed to a range, if there is no flexibility on the pay being offered.
Employers who violate the law may be required to pay money damages to affected employees, amend job postings and policies, and conduct training, among other potential forms of relief. Importantly, the city vowed not to assess a civil penalty for a first complaint alleging violation of the pay transparency requirement, provided that the employer demonstrates it fixed the violation within 30 days of receiving the city's notice of such violation.
Whether an employer satisfies the good-faith element will depend on the relevant information that is available to the employer, and the credible evidence the employer can present to support its methodology and intent to pay.
Recent guidance clarifies this element by providing that employers should post "the salary range the employer honestly believes at the time they are listing the job advertisement that they are willing to pay the successful applicant(s)."1
With that in mind, supporting documentation will be key to establish what the employer knew when it posted a particular salary range.
Further, in its initial form, the law did not address how it applies to remote work positions. The city's recent guidance, however, explains that it includes and covers "positions that can or will be performed, in whole or in part, in New York City, whether from an office, in the field, or remotely from the employee's home."
In practicality, national employers will be required to post salary ranges for remote jobs that could be performed, at least to some degree, in New York City, even if the employee resides elsewhere.
These changes come with significant consequences for employers, beyond the obvious need to revise covered job and transfer postings in advance of Nov. 1. Pay transparency, to some extent, will dictate the process by which an employer evaluates candidates for an open position.
A covered employer will be unable, for example, to interview a candidate knowing that compensation is a wide-open issue, with the employer enjoying some degree of leverage if there is a negotiation.
The employer loses some of that negotiating high ground by being forced to identify the compensation range up front. One view of this dynamic is that it will keep the focus on a candidate's qualifications in making the ultimate hiring decision, because limiting the compensation variable should promote pay equity.
Another potential change comes from the fact that candidates will have more information about what pay is available for comparable positions with other employers in the market. Employers, therefore, should be prepared to explain the basis for whatever salary range they may identify.
Though an explanation is not required, providing one if prompted could go a long way toward securing desirable candidates in a competitive market.
Employers may consider devoting additional time and resources to up-front evaluation of salary ranges, given the indefinite good faith element. Having documentation to support a designated salary range could be powerful evidence in defending against an alleged violation.
Furthermore, employers will need to work with any recruiting partners to confirm compliance in job postings and related communications to candidates.
The overall trend toward pay transparency may signal more to come on this front. Anticipating this issue, and how it could impact your operation, will be key to achieving future compliance.
It is unclear the extent to which the COVID-19 pandemic could hasten or slow the momentum, beyond the effect remote work arrangements may have on an employer's pay-equity obligations; however, for many employers, the pandemic has already resulted in an unprecedented need for skilled workers.
In light of these challenges, even employers operating in jurisdictions that do not currently require pay transparency should evaluate whether pay transparency could benefit their operations and workforce.