Growing Nationwide Emphasis on Pay Transparency: What Employers Need to Know
By: Felix Digilov
Now, more than ever, employers are faced with a nationwide outcry for greater transparency around pay equity and pay transparency, both from employees and potential customers. The Biden Administration certainly echoes these sentiments, and has expressed a desire to pass new pay equity and transparency laws on the federal level. However, numerous states and even local governments are not inclined to wait for the federal government to act and have instead begun to pass their own pay equity and transparency laws. Many of these laws prohibit an employer from preventing employees’ discussion or disclosure of wages, as well as add a requirement that employers disclose a pay range to potential job applicants.
States that have recently passed new pay equity or transparency laws include California, Colorado, Connecticut, and Maryland, who join a host of other states and localities, including Delaware, Illinois, Louisiana, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York, Oregon, Vermont, and Virginia, with pay equity or transparency laws already on the books.
In 2016, Maryland passed the Equal Pay for Equal Work law, which solely prohibited gender-based pay discrimination against employees, not against job applicants. However, beginning on October 1, 2020:
- Maryland employers are prohibited from requesting or seeking an applicant’s wage history, either directly from the applicant or indirectly through a current or former employer. Maryland employers are also prohibited from relying on the wage history of an applicant in considering the applicant for employment or in determining wages. The employer may rely on any wage history the applicant voluntarily provided to increase the initial wage offered. A Maryland employer may also not retaliate against or refuse to interview, hire, or employ an applicant because the applicant did not provide wage history or requested a wage range.
- Maryland employers must provide an applicant with the wage range for an open position upon request.
As of January 1, 2021, if an employer has even one employee in Colorado, Colorado’s Equal Pay for Equal Work Act (EPEW) requires employers to notify employees within Colorado of all promotional opportunities, including those outside of Colorado. Additionally, if the job could be performed in Colorado (even remotely), the posting must include compensation and benefits information. This includes compensation (or a reasonable, good faith range), a general description of bonuses, commissions, or other forms of compensation offered, and benefits.
The EPEW also prohibits discrimination on the basis of sex (including gender identity), by paying employees of one sex differently than another sex for substantially similar work. The statute also prohibits an employer from: (i) seeking wage history from an applicant; (ii) restricting employees from sharing their wage information with others; or (iii) retaliating against an applicant or employee for refusing to provide wage history.
In an effort to address the gender pay gap, effective in 2021, California’s new pay data reporting law requires employers with 100 or more employees, with at least one employee in California, to submit pay and hours-worked data by establishment, job category, race, ethnicity, and sex (also known as “pay data”) to the California Department of Fair Employment and Housing. Reports are due March 31, 2021, and continuing annually on that date.
For each establishment, employers must report:
- The number of employees by race, ethnicity, and sex in 10 specified job categories;
- The number of employees by race, ethnicity, and sex by specified pay bands for each of the employees in each of those categories; and
- The total number of hours worked by each employee, including any paid time off.
Effective October 1, 2021, Connecticut’s new pay equity law will require employers to:
- Provide an applicant the wage range for a position for which the applicant is applying upon the earliest of (a) the applicant’s request, or (b) prior to or at the time the applicant is made an offer of compensation.
- Provide an employee the wage range for the employee’s position upon (a) the hiring of the employee, (b) a change in the employee's position with the employer, or (c) the employee’s first request for a wage range.
Takeaways for Employers
The four state laws discussed above merely highlight the nationwide trend emerging around pay equity and wage transparency in the workplace. Employers who want to stay ahead of the curve should implement a system for responding to applicant and employee requests for wage range information, as well as consider engaging with counsel to conduct a pay equity audit of your open positions, job descriptions, and current employees.
For more information on this topic, contact the author of this post or visit our Labor & Employment Practice page to find an attorney in your area. You can also subscribe to this blog to receive email alerts when new posts go up.