Pay transparency laws are becoming increasingly common, and employers with workforces spread over multiple states are trying to figure out how to contend with a patchwork of similar — but not identical — provisions.
The latest effort to close systemic pay gaps based on gender or race, transparency laws typically require employers to include salary ranges on job postings, and to disclose pay ranges to applicants and current employees on demand, or both. But some laws go even further, requiring employers to detail the job duties or full panoply of benefits that come with a particular position.
Colorado’s first-in-the-nation pay transparency law took effect two years ago, while laws in California, Washington and Rhode Island were implemented on Jan. 1, 2023.
Meanwhile, New York City’s pay transparency law went into effect on Nov. 1 of last year, and a statewide law in New York will arrive in September.
A bill pending in the Massachusetts legislature would require “covered employers” to disclose the “pay range” — defined as the compensation that an employer “reasonably and in good faith expects to pay” — within the advertising or posting of positions and on demand to either applicants or employees being offered promotions or transfer. First-time offenders would be given a warning. A second offense would bring a $500 fine, and subsequent violations would expose an employer to more severe penalties.
When Colorado first passed its pay transparency law, some employers thought they could avoid it by avoiding hiring employees who lived there. But that reaction led to backlash, when a website was launched to bring negative attention to companies not complying with the Colorado law.
The issue of compliance with laws in other states is especially important in a world with so many remote workers, and employers must remain aware that new pay transparency laws are passing in various jurisdictions regularly.
Here are some recommendations on handling compliance:
- The strictest law: Legal experts advise that employers develop job postings in a way that complies with as many state and local laws as possible. Often that means a posting that pass muster under the strictest law. Also, consider including a statement that explains that an employee’s salary may vary based on location, experience and performance.
- Pay audits: Pay audits are becoming even more important in view of the patchwork of laws. They can help companies regularly review how and what employees are paid and why. A thorough audit uses statistical analyses to effectively compare salaries across jobs and consider discrepancies.
- Job descriptions: Employers should also review their processes for creating job descriptions and matching them with salaries.
- Copious documentation: Employers should be careful to document the reasoning behind pay ranges and any decisions to deviate from them.
For some states’ pay transparency laws, experts are awaiting further regulations on implementation.
Meanwhile, if the pending Massachusetts law is passed as written, it leaves open the question of how accurate a posted pay scale will need to be, given language in the bill about what the employer “reasonably and in good faith expects to pay.”
In California and New York, the state intends to monitor whether posted salary ranges have indeed been made “in good faith” by requiring employers to report actual pay ranges at regular intervals.