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Is Pay Transparency the New Normal? Here’s What Employers Should Know

November 11, 2022
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Earlier this month, New York City became the latest jurisdiction to impose pay transparency requirements on employers. Effective Nov. 1, 2022, New York City’s Pay Transparency Law, an amendment to the New York City Human Rights Law, requires all New York City employers to include salary ranges in job advertisements. Similar laws have been enacted or are currently pending in several other jurisdictions, including two jurisdictions in Ohio, as well as state-wide in California, Colorado, Connecticut, Maryland, Nevada, Rhode Island and Washington.

New York City’s Pay Transparency Law

Under New York City’s Pay Transparency Law (the NYC Law), employers and employment agencies with four or more employees, at least one of whom works in New York City, are required to include a “good faith” base salary range in job advertisements. An “advertisement” includes any publicized written description of an available job, promotion or transfer position, regardless of form. This includes job advertisements listed both internally (i.e., on the employer’s website) and on external websites such as LinkedIn, Glassdoor and Indeed. A “good faith” salary range means:

“The salary range the employer honestly believes at the time they are listing the job advertisement that they are willing to pay the successful applicant(s).”

The job advertisement cannot be open-ended and must include both a minimum and maximum salary for the position. The NYC Law does not prohibit employers from offering more than the advertised salary range for a highly qualified applicant or less if the employer’s financial circumstances have changed.

Importantly, the NYC Law applies to all job postings for employees, independent contractors and interns, as well as both salaried and hourly employees. The NYC Law also applies to remote positions that “can or will be performed, in whole or in part, in New York City.” Therefore, employers advertising nationally for fully remote and/or hybrid positions should ensure compliance with the NYC Law.

Who Enforces Pay Transparency Laws?

New York City’s Commission on Human Rights (the Commission) is responsible for enforcement of the NYC Law. Specifically, the Commission may impose civil penalties up to $250,000 for willful violations. In addition to monetary penalties, the Commission may require employers to amend job advertisements, create policies, conduct training and provide notices of rights under the NYC Law to ensure compliance. The NYC Law also provides a private cause of action to recover compensatory and punitive damages, attorney’s fees and costs for violations.

Pay Transparency Laws in Ohio

While Ohio has yet to enact a state-wide pay transparency requirement, Cincinnati and Toledo have passed ordinances imposing certain requirements and prohibitions on employers.

Cincinnati

On March 13, 2020, Cincinnati became the first jurisdiction in Ohio to require greater pay transparency with the City of Cincinnati Ordinance No. 83 (the Cincinnati Ordinance). The Cincinnati Ordinance prohibits any employer, employment agency or labor organization in Cincinnati with 15 or more employees from inquiring about an applicant’s compensation history, screening applicants based on compensation history, relying on compensation history in deciding whether to make an offer of employment or in determining compensation, and declining to hire an applicant who refuses to disclose his/her compensation history. However, employers may “engage in discussion” with applicants about their compensation expectations. Additionally, “upon reasonable request,” employers must provide the “pay scale” for a position if the applicant has been provided a conditional offer of employment, but the term “pay scale” is undefined. The prohibitions contained in the Cincinnati Ordinance do not apply to current employees who are transferred or promoted internally, voluntary disclosures of compensation history by applicants, background checks of non-salary information that may reveal compensation history and former employees re-hired within five years of separation.

Toledo

Shortly after the Cincinnati Ordinance took effect, Toledo enacted the Pay Equity Act effective June 25, 2020 (the Toledo Act). The Toledo Act prohibits employers with 15 or more employees from inquiring about an applicant’s compensation history during the application process. Like the Cincinnati Ordinance, the prohibitions contained in the Toledo Act do not apply to current employees who are transferred or promoted internally, former employees who are re-hired within five years of separation or applicants who voluntarily disclose their compensation history. Further, employers are permitted to “engage in discussions” with applicants about compensation expectations and may verify a voluntary disclosure of compensation history. The Toledo Act also requires employers to provide the “pay scale” if the employer has made a conditional offer of employment and “upon reasonable request” by the applicant. However, like in the Cincinnati Ordinance, the term “pay scale” is undefined.

The Cincinnati Ordinance and the Toledo Act both provide applicants with a private cause of action against employers and contain a two-year statute of limitations. Employers may be liable for compensatory damages, reasonable attorney’s fees, costs and other legal and equitable relief.

Pay Transparency Laws in Other Jurisdictions

New York City also follows several states that have passed pay transparency laws:

  • California’s Pay Transparency for Pay Equity Act, which will take effect on Jan. 1, 2023, requires employers with 15 or more employees to include salary ranges in job advertisements. Specifically, employers must include the “pay scale” for a position, meaning the salary or hourly wage range that it “reasonably expects” to pay for the position.
  • Colorado’s Equal Pay for Equal Work Act requires all employers with at least one employee working in Colorado to include compensation and benefits information in all job advertisements. Employers are also required to keep records of job descriptions and wages and notify all current Colorado employees before making a promotion decision.
  • Connecticut’s Act Concerning the Disclosure of Salary Range for a Vacant Position requires employers of Connecticut employees to disclose the “wage range” of a position to applicants and employees. “Wage range” means “the range of wages an employer anticipates relying on when setting wages for a position.” The wage range must be provided to the applicant either upon request or when the applicant is made an offer of compensation, whichever is earlier.
  • Maryland’s Equal Pay for Equal Work Act requires employers to provide applicants with wage range information upon request and imposes various restrictions on inquiring about compensation history.
  • Nevada’s pay transparency law, Senate Bill 293, prohibits private employers and certain public employers from requesting an applicant’s compensation history during the hiring process and requires employers to provide the salary and wage range to an applicant following an interview.
  • Rhode Island’s Equal Pay Law requires employers to provide a “wage range” for job positions upon request. “Wage range” means the range that the employer anticipates relying on in setting wages for the position. Employers must also provide a “wage range” to employees who are promoted or transferred. Additionally, employers are prohibited from relying on an applicant’s compensation history to determine compensation.
  • Washington’s amended Equal Pay and Opportunity Act, effective Jan. 1, 2023, requires employers with 15 or more employees to include “wage scale” or “salary range” and benefits information in job postings. This requirement also applies to current employees who are transferred or promoted internally.

Navigating Pay Transparency Laws

With pay transparency laws becoming more commonplace across the United States, employers should be prepared to navigate the nuances of these laws. Accordingly, employers should take the following steps to ensure compliance:

  • Remain informed on existing and pending pay transparency laws.
  • Determine and document salary ranges for all open positions.
  • Review upcoming and preexisting job postings, both internal and external, including transfer and promotion opportunities.
  • Train supervisors and managers, the human resources department and hiring personnel on the implications of pay transparency laws, strategies to ensure compliance and best practices for handling issues that may arise as a result of greater salary transparency.
  • Employers that advertise nationally for remote and/or hybrid positions should comply with the strictest pay transparency laws. Currently, this means that all job postings must include the minimum and maximum salary of the position as well as benefits information.
  • Consult with legal counsel.

KJK will continue to closely monitor developments related to pay transparency laws. For more information or to discuss further, please contact KJK’s Labor and Employment Chair Rob Gilmore (RSG@kjk.com; 216.736.7240) or attorney Hannah Kraus (HJK@kjk.com; 216.736.7243).

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