Measures to offset wage discrimination have periodically been implemented throughout recent history, and in 2019, the Alabama government passed the Clarke-Figures Equal Pay Act to make wage discrimination officially illegal in Alabama. This act prohibits employers from paying different wages to employees of the same sex and race with the same skills, education, experience, and responsibilities.
Pay transparency laws have similar goals, though they put the onus on individual companies to share information about their salary offerings. They are designed to prevent discrimination by giving employees clear information about their pay ranges. While only a few states have adopted pay transparency laws, their prevalence is increasing and has some traction for potential federal legislation.
To stay on top of HR compliance, you must be aware of pay transparency trends to follow the latest state and federal legislation changes.
What Are Pay Transparency Laws?
Pay transparency laws are a subset of wage discrimination laws that require companies to disclose salary and wage ranges for open positions. In recent years, several states have passed pay transparency laws that aim at eliminating wage-related sex and age discrimination – though they are not in effect most states, including Alabama or any other states in the Southeast U.S. The focus is on making the wages transparent to the candidate while searching for a suitable position and giving candidates an idea of what salary they should expect upon hire.
While the details of pay transparency laws differ, they generally require employees to disclose salary information to existing and potential employees in specific circumstances. Each state defines when, where, and how this information must be disclosed. Listing pay ranges provides insight into what negotiation room candidates have during hiring, and these laws aim to encourage candidates to take the initiative in negotiating wages based on their skills and experience.
In addition to revealing the wages or wage ranges, pay transparency laws often include other requirements, such as record-keeping obligations for companies to self-report their wage data and provide the clearest picture of salary ranges in job postings.
Are There Pay Transparency Laws in Effect?
Several states already have pay transparency laws in effect. Some are planning to implement them in the near future. Examples include:
- California: (effective January 1, 2023) – employers with 15 or more employees must add a pay scale to any job posting if the position can be filled in California. Penalty – not less than $100 and not more than $1,000.
- Washington: (effective January 1, 2023) – if requested, employers must provide a wage scale to existing employees before a transfer within the company and the salary range on job postings. Penalty – up to $500 for the first violation, $1,000 +10% of damages for subsequent violations.
- New York: (effective September 17, 2023) – employers must disclose the salary or salary range in job ads and promotion or transfer options within the company. Penalty - $1,000 for the first violation, $2,000 – for the second, and $3,000 – for the third and subsequent violations. New York City, Ithaca, and Westchester County have additional legislation requiring minimum and maximum salaries.
- Colorado: As of January 1, 2021, employers must include compensation in job posting, notify promotion opportunities to employees, and maintain wage records. It is fined between $500 and $10,000 per violation.
Several states have laws that require employers to disclose wage ranges upon request or at pre-determined stages of interviewing. These states include:
Certain localities have specific pay transparency laws that pertain only to their cities. In addition to the localities in New York listed above, these include:
- Jersey City, NJ: Employers must provide salary and benefit information for all jobs, transfers, or promotion opportunities.
- Cincinnati, OH: After putting forth a conditional offer of employment, employers must provide salary pay ranges upon candidate request. This law also prohibits employers from inquiring about candidates’ salary history.
- Toledo, OH: Similar to (and passed shortly after) Cincinnati’s pay transparency bill, Toledo’s bill requires employers to provide a pay scale upon request once making a conditional offer of employment. It also prohibits inquiry into candidates’ salary history.
In March 2023, Congress proposed a pay transparency bill, though it isn't in effect at the time of writing this post. If this new federal law passes, employers nationwide must provide a wage range for public and internal job postings. If there isn't an official job posting available, employers would still have to make the wage range or pay rate transparent before discussing the salary with the applicant.
In addition, the law would require employers to notify employees about their pay or wage range during the hiring process and continue doing so at least once a year. Whenever an employee requests information about the pay range, the employer would have to provide it. The law would also prohibit employers from discriminating or retaliating against employees based on their request for pay transparency.
Do I Need to Prepare for These Laws?
Before the bill goes into effect, employers don't need to take any specific action. However, you can consider proactive measures to update internal record-keeping to determine wage ranges for internal reports to avoid potential non-compliance. If a bill does go into effect, you will already have all the information ready to include on your internal employees and job listings or if that information is requested.
If you are working with a professional employer organization (PEO), their HR regulatory experts can guide you through the process and, if the time comes, adjust your hiring processes to adhere to them, as well. They can offer insight to help adjust your HR tactics according to the new pay transparency laws, make timely updates, and ensure real-time compliance. Furthermore, a PEO can save you time and money by auditing your current wage rates to ensure you are fully prepared in case of any new requirements.
Moving to pay transparency doesn't have to be a complex process, as the only real change you may need to make is keeping a separate record of internal wage information and including that in job postings. With most states, wage transparency is self-reported, meaning companies notice few changes in their normal business operations but will periodically submit reports, either yearly or as requested.
Meeting Pay Transparency Laws Fully Prepared
However, until a pay transparency bill is passed, your company does not need to take any action. Any measures you take will be strictly proactive. Taking proactive measures to prepare for pay transparency requirements can make the transfer to the new landscape faster and less stressful. It could also help with your recruiting and hiring efforts by providing information to candidates during the application phase and demonstrating your company's care for its staff before they meet you.
By collaborating with a reliable HR outsourcing partner, you can ensure a smooth update to your processes to ensure continuous compliance. Their guidance and expertise as payroll experts can give you the proper information without relying on your team to take on too much additional effort.
