The trends in worker protection require companies to comply with new equal pay and pay transparency ordinances in their state. Every state, except Mississippi, affirms that an employer shall not discriminate in providing compensation for similar jobs based on the sex of similarly employed individuals. In addition, some states have extended considerations to include other protected classes, including race, age, or gender identity.
The latest trend in this arena is pay transparency. Twenty states now have laws prohibiting employers from discharging or discriminating against employees for inquiring about, disclosing, comparing, or discussing an employee’s wages. The next wave of pay transparency laws requires companies to disclose the salary or hourly range when they post an open position.
Colorado expanded on the pay transparency wave in 2021 by requiring employers to post the compensation range and a general description of all employee benefits in their job postings, external and internal, either directly or through a hyperlink. This disclosure is necessary for any applicant living in Colorado, even if the company is not located in Colorado. Unfortunately, many companies tried to skate around the requirement by not allowing remote applicants residing in Colorado. However, this loophole has since been closed with new legislation.
Other states and municipalities have copied Colorado’s pay transparency laws and, in some cases, expanded on them. For example, New York City adopted a similar statute to Colorado’s, which started in May 2022. In addition, New York state passed legislation on a similar law as New York City that awaited the governor’s signature and will begin 270 days after being signed by the governor. Starting in January 2022, Washington and California will follow in Colorado’s footsteps.
During the 2022 legislative session, Washington lawmakers passed ESSB 5761. Starting January 1, 2023, employers with 15 or more employees will be required to ‘disclose in each posting for each job opening the wage scale or salary range, and a general description of all of the benefits and other compensation to be offered to the hired applicant.’. In addition, the employer must provide a wage scale or salary range upon request of an employee offered an internal transfer to a new position or promotion. The bill also declares, “Posting means any solicitation intended to recruit job applicants for a specific available position, including recruitment done directly by an employer or indirectly through a third party, and includes any postings done electronically, or with a printed hard copy, that includes qualifications for desired applicants.”
Governor Gavin Newsom signed California Senate Bill 1162 on September 28, 2022. Starting January 1, 2023, the law requires ‘an employer with 15 or more employees to include the pay scale for a position in any job posting.’ However, the California bill goes one step further than Colorado. The bill requires an employer to maintain records of a job title and wage rate history for each employee for a specified timeframe to be open to inspection by the Labor Commissioner. In addition, employers with 100 or more employees must provide median and mean pay gaps and contractor pay reports. This requirement means organizations will have to gather pay and demographic information from staffing companies, which has never been a requirement in the past. More information on reporting requirements can be found at this link.
What do companies need to do before the law goes into effect?
- Create wage scales or salary ranges for all positions in your company. However, do not make the scales overly broad or too narrow. It has been shown that candidates are far less likely to apply when they come across job postings with inflated pay ranges. Wide ranges can be hard to explain to both prospective and existing employees. In addition, a narrow range shows candidates the company is unwilling to negotiate based on qualifications or experience.
- Develop a process to review how these ranges are disseminated. Not only must the ranges be posted on a company’s site, but they must be included when they use a third-party company like Indeed, Monster, ZipRecruiter, or others. In addition, Postings requiring the disclosure of benefits like time off, medical, and other benefits common to all employees can be included by using a direct link to this information on a company website. Create a system where all postings are reviewed for all necessary information.
- Consider an internal audit of current employee salaries to ensure no significant discrepancies. With new laws coming into effect is a perfect opportunity to launch a pay equity audit to ensure that your entire workforce is compensated fairly and appropriately. In addition, You should also consider whether such an audit would be best conducted by working with your attorneys to preserve confidentiality when analyzing potential legal claims.
*This information simplifies complex Acts as it is understood by Time Equipment Company. It is not to be taken as legal advice. The regulations for this program are changing. For further information, contact your state or local Department of Labor.