What Pay Transparency Laws Mean For Employers

In the past, there were three things people were taught not to talk about with new acquaintances – religion, money and politics. And yet, those topics seem to have a chokehold on the conversation across major social media networks, particularly as we see laws like Roe V. Wade turned over or Florida’s “Don’t Say Gay” bill introduced. However, talking about money is still taboo for many, particularly the older generations.

According to a survey from Insider, 47% of 18 to 34 year olds regularly discuss money with others while only 38% of 35 to 54 and 25% of 55 to 74 year olds are comfortable with it. With the collective apprehension to discuss money, employers have continued discriminatory compensation practices without consequence, and the gender pay gap is the writing on the wall. At the current rate, it’s estimated it would take women 257 years to make the same amount of money as men.

While greater systemic issues such as lack of access to education, career choices based on family responsibilities and conscious and unconscious bias are factors of this where the discrepancy started, state and local governments have slowly started adopting Pay Transparency Laws in an effort to combat pay discrimination.

How Pay Transparency Laws Differ State to State

There are 17 states that have laws around pay transparency, but for the most part, these laws simply disallow employers from penalizing employees that openly discuss salaries. They all slightly differ in what’s required of employers, employees and potential candidates.

Currently California, Connecticut and Maryland require employers to offer a pay range during the hiring process when candidates request it, while those in Nevada must automatically provide it following the initial interview regardless of whether or not a candidate requests it. Rhode Island will follow the likes of California, Connecticut and Maryland starting in January 2023.

As of January 2021, Colorado was the first state to require all job listings for employers with one or more employees to list a pay range on every job listing. New York City’s similar law went into place on November 1, 2022.

NYC’s Pay Transparency Act requires a “good faith” pay range in all job advertisements. This applies to all employers that have four or more employees (owners count towards that number) or one or more domestic workers and all of the employees do not need to be located in New York City.

“They've covered low wage workers and high wage workers,” Laurie Berke-Weiss, an employment lawyer in New York City, said. “In a city where a lot of people hire nannies and other household help, if they advertise a job for one person, then they have to make a good faith statement of what the salary range is.”

As the NYC law is new, there are some expected discrepancies in what “good faith” actually means. The New York Post’s job advertisement for a digital reporter position says the salary range is $15 an hour to $125 thousand a year.

“The concept of good faith is sort of woven into so much of the law,” Berke-Weiss said. While she says sometimes you just know it when you see, ultimately what is actually considered “good faith” will become clearer as we see what enforcement of the Act looks like.

Realistically, the wider the range it seems the less likely the employer actually knows who it is they’re looking for. The New York Post job is asking for 1 to 2 years experience, and the salary range doesn’t match that. “They’re not really advertising for one job with that salary range,” Berke-Weiss said.

How Colorado’s Pay Transparency Law Has Been Received

Seeing employers trying to find ways around true sharing a true pay transparency range in New York isn’t a first. Employers in Colorado tried similar tactics and some with remote opportunities even went as far as to exclude applicants from the state in order to avoid including a salary range.

This prompted the creation coloradoexcluded.com, a website exposing companies doing so. Companies like Nike, Cigna and Airbnb, who attempted to exclude Colorado applicants initially, were found in violation of the law.

Employers’ resistance to change seems misguided as we take a look at what Colorado’s experienced over a year with their law in place. According to a study released by Recruitonomics in August 2022, Colorado job listings on Indeed immediately dropped 8.2% but employment slightly increased. While they cannot fully credit the new law being in place, employees are so for transparency within job descriptions, it’s likely employers will have more aligned applicants, an easier time filling positions and subsequently spend less money during the hiring process.

Without waiting for any law to be put into place, the HR analytics company Syndio started prioritizing pay transparency in their hiring process in December 2020. Despite experiencing a time of high growth and significant change, they’ve maintained a 90% retention rate and have reported employees sharing their appreciation for the transparency specifically.

Berke-Weiss really emphasized how these next couple months stand to shape how the law actually works, but in looking to Colorado, there were very few employers who have actually been penalized for their misapplication of the law. As of July of 2022, only three companies had been fined amounts ranging from $2000 (which was waived due to compliance) to $34,500.

In New York City, the violations can carry up to a $250,000 fine if an employer does not comply within 30 days of receiving a notice of violation from the NYC Commission on Human Rights.

In addition to looking to Colorado for what to expect in terms of types of violations or repercussions, Fortune reported that some employers received backlash from their existing team who came to find they were being significantly underpaid in comparison to the open positions complying with the new law.

What Employers Should Do For a Smooth Transition to Pay Transparency

While it’s vastly different from how salary discussions have been handled in the past — where employers don’t typically disclose salary information until the offer letter — there are benefits to including accurate salary ranges for the employers as well.

“From the employers’ perspective, you have to make a good faith effort to say what it is you're going to pay and maybe the employer has to do a little more homework,” said Berke-Weiss. This can only benefit the employer, as we found it’s commonplace for job descriptions to run long and lack clarity on the position they’re hiring for. Having to be more intentional and aware of an organization’s needs should afford them hiring more aligned candidates and cut the costs of a lengthy hiring process.

For those that are able, they should also do an audit of their current team’s salaries and make necessary adjustments where there are large discrepancies in pay among employees at the same level.

Knowledge is power, specifically for today’s workforce that has experienced such radical change over the course of the global pandemic. Allowing candidates to make their most informed decisions at the very beginning of the application process will not only lead to less wasted time with the wrong candidates, it will attract candidates who value rational and informed decision making and employers’ efforts for transparency.

“As this develops, there are going to be organizations that test out whether the law is really being observed in a way that it's intended,” Berke-Weiss said. With the intention of taking greater steps toward pay equity, employers fighting this simply look as if they want to uphold discriminatory payment practices.

“Maybe the employer is going to think twice before they tell a qualified woman that they're only going to pay her X minus, when they were willing to pay the white guy who had the same qualifications X plus — simply because he asked for it, and they were both operating from a place of ignorance,” Berke-Weiss said.

While talking about salaries and money seems unnatural for many, it will become commonplace as more states and regions – particularly those that are hubs for highly in demand talent – are taking more steps to undo decades of discriminatory compensation practices. Trying to find ways around these new laws is flatly a waste of time and resources that could be invested in understanding the law and building a more equitable, sustainable and attractive place of employment.

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