Pay transparency continues to expand in the workplace
As more states institute requirements, push toward disclosure grows
Bans on pay secrecy in the workplace have been around for years under the federal National Labor Relations Act and under many state laws, like those in New Hampshire, Massachusetts and Maine. Under these protections, workers may discuss their pay with coworkers (or anyone) without fear of retaliation or discharge, with the idea that it will help promote fairness and avoid discrimination on the basis of gender or another protected class.
Salary history bans have been growing across the country and are enforced in 29 states, including Massachusetts and Maine, and in over 20 localities such as San Francisco, Kansas City, Philadelphia, and Salt Lake City. These laws generally prohibit employers from inquiring about a candidate’s salary history before a job offer with all terms of compensation has been made. Employers must consider the laws in any states and cities in which they have employees.
However, if you are hiring in a state like New Hampshire, which does not prohibit salary history questions, it is recommended not to inquire. Not only do you risk perpetuating pay discrimination, but you can also risk paying the wrong salary. Compensation should be based on the internal and market worth of the position, as well as an individual’s experience, education, skills, and other relevant, job-related factors. Some companies hire an outside expert to provide compensation pay data to help set the appropriate salary.
The newest development in transparency requires employers to provide upon request or incorporate wage ranges in any postings (generally defined to include internal and external job postings, remote job postings, and postings by third parties, such as recruiters).
Current states with pay disclosure requirements as of Jan. 1, include:
- California: employers with 15 or more employees with at least one employee located in the state
- Colorado: employers with at least one employee located in the state
- Connecticut: employers must provide a wage range to current employees and applicants upon request or during the communication of job offer, whichever comes first
- Maryland: employers must provide a wage range upon applicant’s request and are prohibited from refusing to interview or hire someone because of their request
- Nevada: employers must provide a wage range for applicants after their interview
- New York City: employers with four or more employees are required to post the wage range in any job posting
- Rhode Island: employers with one or more employees must provide the wage range to an applicant on request or at time of the hiring, whichever is earlier
- Washington: employers with 15 or more employers must include a wage range, plus a description of benefits and other compensation in job postings.
A best practice?
As of January 2023, most employers in the United States still have options around transparency practices. Sharing compensation in job postings has become a best practice recently due to movements such as the “Great Resignation” and increasing worker shortages occurring over the past two years. As younger generations join the workforce, a shift in worker expectations is noticeable. Part of the shift is a desire for more transparency and fairness, as well as a need for trust from organizations. A recent 2022 study found people actually worked harder when they knew the average salary in their department.
However, the effects of pay transparency are still new, developing and varied based on culture and demographics like occupation, industry, and geography. For example, if you enter #paytransparency into the LinkedIn’s search feature, you will find a wide range of posts with data, real stories, and opinions on the topic.
Risks and solutions
Transparency can shed a light on pay inequities — real or perceived — which can lead to discontent, feelings of unfairness, complaints and possible discrimination claims. Employers need to resolve internal issues, which may include pay adjustments.
Moving forward, employers must be proactive and carefully analyze their pay practices and establish pay structures and guidelines for managers to follow when hiring and promoting workers. Reach out to your employment lawyer to help review and address pay inequity concerns and answer questions.
Organizations should also encourage communication and an open door policy so workers are comfortable talking to their manager or HR, before they even consider filing a complaint with the Equal Employment Opportunity Commission or their state’s Human Rights Commission.
Attorney Amy Cann is member of McLane Middleton’s Litigation Department and its Employment Law and Cybersecurity Practice Groups.