This article was originally published in Law360 on January 9, 2023, and is republished here with permission.
A recent wave of pay transparency laws aimed at improving pay equity has left many employers confused about how to recruit across state lines.
This article provides a summary of key pay disclosure requirements across the country, provides employers with practical guidance on how best to navigate the various standards, and looks ahead to what the future may bring.
Pay Transparency Law Updates for 2023
Employers in California have long been required to provide applicants with the pay scale for a position upon reasonable request. However, beginning Jan. 1, employers with 15 or more employees, at least one of whom is located in California, must include the pay scale for a position in any job posting, including positions posted by third parties.
Employers with one or more employees in Colorado are required to disclose the hourly or salary compensation, or a range of the hourly or salary compensation, that the company would pay for the role, in each posting for a job opening.
The Colorado Department of Labor has confirmed that this law applies, with a few narrow caveats, to all remote job openings so long as the employer has at least one worker in Colorado.
Employers with one or more employees in Connecticut must provide a wage range to current employees and applicants upon the receipt of either: (1) the applicant’s request or (2) the communication of an offer of employment, whichever comes first.
The Connecticut Department of Labor has confirmed that the law applies to employers within the state using the services of one or more employees for pay even if such employees are located outside the physical confines of the state.
Employers must provide the wage range for a position at the applicant’s request, and employers are prohibited from refusing to interview or hire an applicant because they requested the wage range for the position.
Employers must provide the wage or salary range or rate of pay for a position to applicants who have completed an interview for the position.
New York City
As of Nov. 1, 2022, employers with four or more employees are required to include a position’s minimum and maximum annual salary, or hourly wage, in any job posting. The law applies to any position that could be filled by a candidate who resides in New York City or any position that could be performed at least in part in New York City.
Beginning Jan. 1, employers with one or more employees in Rhode Island must provide the wage range for a position to an applicant on request or at the time of hiring, whichever is earlier.
Even when the applicant does not make a request, the law encourages employers to provide the wage range for the position prior to discussing compensation.
Since 2019, employers in Washington state with 15 or more employees have been required to disclose the minimum wage or salary for a position on an applicant’s request if an offer of employment has been made.
Beginning Jan. 1, employers must disclose the wage scale or salary range for an opening in any job posting. The Washington State Department of Labor and Industries’ Employment Standards Program has issued guidance for employers and sample job postings that meet the disclosure requirements under Washington state law.
Practical Guidance for Hiring in 2023
Pay transparency laws pose unique challenges for large and small employers alike, particularly those who routinely recruit across state lines. The burden on employers is further complicated by the trend toward remote work, which can create obligations and liabilities for companies in states the company has no physical presence.
As such, a company advertising for a position that could be performed by a remote worker — i.e., in any state — must ensure that the posting complies with all applicable pay transparency laws, including, for example, the salary range requirements under Colorado law.
Employers also cannot avoid these obligations by stipulating that residents of a particular state or locality are not eligible for an advertised role. Colorado’s Department of Labor and Employment has considered and flatly rebuked such efforts to circumvent Colorado law, and employers should anticipate similar enforcement in other states.
While many employers may be reluctant to adjust their hiring practices, noncompliance can have costly consequences. Depending on the jurisdiction, penalties for noncompliance can range from $300 to $250,000 per violation.
At this early stage in the pay transparency revolution, there are two main approaches we see companies taking.
For starters, smaller or regional employers are attempting to keep their workforce out of states with pay transparency laws by restricting remote work entirely or mandating a minimum in-office presence in states or localities that do not have a pay transparency requirement.
So long as employers are truly hiring for positions that are not eligible for remote work or could not be performed fully remotely, this approach can be squared with pay transparency laws as they have been interpreted thus far. That said, this approach is probably impractical for companies with large work forces or those embracing remote work, and it can only last so long as pay transparency laws do not change in the employer’s current geographic footprint.
More often, we see employers overhauling their recruiting practices, job postings or compensation structure to standardize their job postings and include hourly wage or salary ranges for all positions nationwide.
As long as employers intend to recruit or even consider hiring employees in places like California, Colorado or New York City, it is likely more efficient to include salary or wage ranges in all job postings rather than to try to distribute different job postings in different locations and attempt to control the dissemination of information.
While this change may seem daunting, employers can take steps to ensure they have flexibility while still complying with state and local job posting requirements.
For example, the hourly or salary wage range in a job posting can often be stated broadly — so long as the high and low numbers disclosed are in good faith — to accommodate a variable candidate pool, thereby retaining flexibility and leverage for the employer in compensation negotiations.
Similarly, employers are adjusting compensation structures to include variable compensation components — e.g., discretionary bonuses or equity grants — that may be excluded from the required disclosures or expressed in terms of percentages of base compensation, provide additional flexibility in negotiations and thus working within, but around, the perceived limitations of pay transparency requirements.
Further, a job posting that identifies a salary or wage range for a position can include qualifying language explaining that where an applicant will ultimately fall within the stated range depends on a variety of factors, including, for example, geographic location and level of experience.
The pay transparency laws discussed in this article are new or imminently set to take effect. We expect to see guidance from state and local authorities administering these laws in the coming months on how these laws will be interpreted and enforced, particularly with respect to remote workforces.
Employers should also brace for similar laws cropping up across the country; in fact New York will likely be next. On June 3, 2022, New York passed S.B. 9427, which mirrors the pay transparency requirements of New York City in many ways. The bill is awaiting the governor’s signature, and is expected to go into effect 270 days after signing.