According to the federal government, “[a]lthough the gender pay gap has narrowed since the signing of the Equal Pay Act of 1963, women earned 82 cents for every dollar a man earns, according to 2020 data from the Bureau of Labor Statistics.” And according to the Department of Labor, “[m]any women of color were paid even less. For example, Black women were paid 64%, and Hispanic women (of any race) were paid 57% of what white non-Hispanic men were paid.” To level the playing field, state and local governments are turning to pay transparency laws to try to reduce and ultimately eliminate the gender pay gap.
Moreover, some observers posit that there is a cultural shift underway towards an expectation of greater transparency in pay. As reported by USA Today, “a survey of 1,000 full-time U.S. employees by analytics firm Visier found that 79% prefer pay transparency. Nearly as many – 68% – said they would switch jobs to join firms with greater pay transparency even if the compensation is the same.” The same article in USA Today reported that “pay transparency leads to increased happiness, engagement, and loyalty at work, according to a recent survey from job portal Indeed which now prominently features salary ranges when employers provide them.”
Several jurisdictions have passed broad-ranging pay equity and pay transparency laws in a new bid to reduce or eliminate this pay gap. These laws are aimed at imposing greater consequences on employers who discriminate based on gender, race, or ethnicity in pay and, in a more groundbreaking fashion, seek to force employers to disclose wages to current employees, job applicants, and – in some cases – the public at large.
NEW YORK STATE
New York City passed a pay transparency law that went into effect on November 1, 2022. That law requires employers in the city to post minimum and maximum salary information for positions, except for jobs that cannot or will not be performed in New York City. The new law requires employers with four or more employees (including independent contractors) to state “the minimum and maximum salary” in each “advertisement” for a “job, promotion, or transfer opportunity” as long as one of the employees works in New York City.
Then, on December 21, 2022, New York State enacted a statewide pay transparency law, becoming one of the latest states to jump into pay transparency legislation. When signing the legislation, Governor Kathleen Hochul stated, “[t]his historic measure will usher in a new era of fairness and transparency for New York’s workforce and will be a critical tool in our efforts to end pervasive pay gaps for women and people of color.” The law, which goes into effect on September 17, 2023, requires employers with four or more employees to post compensation ranges for any job positions, promotions, or transfer opportunities.
COLORADO
Elsewhere, Colorado is at the forefront of legislation to improve pay equity and force pay transparency. The Rocky Mountain State’s groundbreaking Equal Pay for Equal Work (EPEW) Act, which has been in effect for two years, adds more (potentially redundant) prohibitions on gender-based pay differences. The EPEW Act also bans the use of salary history to set initial pay for new hires, bans salary history inquiries by employers seeking to hire, and aims to force employers to disclose pay in job postings and notify all current employees simultaneously of promotional opportunities, including the pay associated with each opportunity.
CALIFORNIA
Traditionally a bellwether for progressive employment legislation, California passed SB 1162 on September 27, 2022. The law added requirements to California’s existing “salary history ban” that prohibits employers from seeking or using an applicant’s salary history in deciding whether to offer a job to the applicant or in determining what salary to offer an applicant. The law also requires California employers to provide pay scale information to job applicants upon reasonable request.
SB 1162 now extends the pay transparency obligations of California employers to current employees as well, obligating all California employers to provide pay scale information for an employee’s current position upon request and also requiring California employers with 15 or more employees to publish the pay scale for a position in any job posting.
The consequences, both intended and unintended, of these new pay transparency laws remain to be seen. And while there is room for disagreement over whether new pay transparency laws will be a net positive for workers and employers, one thing is clear: legally-mandated pay transparency is a trend to which employers must be attuned.
Janice Sued Agresti (’17) is an associate in the Labor & Employment practice group at Cozen O’Connor.