4/6/23
Many states have enacted pay transparency laws with the goal of improving pay equity. These laws require employers to make certain disclosures regarding pay rates and ranges. With more and more states adopting pay transparency laws, employers are struggling to keep up with best practices, especially when hiring across state lines.
Pay transparency laws, combined with the rise in remote work, create complications for employers of all sizes. Companies may be subject to pay transparency laws both when intentionally advertising for job positions across state lines, and when a job could be performed remotely in any state. Further, depending on the jurisdiction and the facts, the penalty for a first violation can be severe, ranging from $300 to $250,000 per violation. Thus, employers must ensure that any job advertisement complies with all existing applicable pay transparency laws.
One example of the pay transparency evolution can be found in California. Prior to January 1, 2023, California law prohibited employers from asking applicants about salary history during the hiring process. State law also required employers to provide the pay scale for a position to applicants upon a “reasonable” request. As of January 1, 2023—in addition to the foregoing—all employers must, upon request, provide current employees with the pay scale for the position in which the employee is currently employed. Employers with 15 or more employees must also include the pay scale for a position in any job posting, even if the employer uses a third party to create the job posting.
Although states have not yet imposed large penalties for violations of pay transparency laws, states are aggressively enforcing these laws in other ways. For example, Colorado’s Equal Pay for Equal Work Act—which applies to all employers that have at least one employee in Colorado—requires covered employers to (i) provide its Colorado-based employees with formal notice of “promotional opportunities,” and (ii) disclose salary compensation and employee benefits in all job postings for positions that are expected to be, or can be (e.g., remote positions), performed in Colorado. Many employers, including several of the largest in the country, attempted to sidestep the law by merely stating that the advertised role could not be filled by a resident of Colorado. By issuing hundreds of warning letters (and only a handful of minor fines), Colorado’s Department of Labor and Employment has quickly stopped employers’ attempts to dodge the law.
Some employers located in states that do not have pay transparency requirements are avoiding such laws by either completely ending remote work options or implementing a minimum in-office presence mandate. These approaches appear to be acceptable under current interpretations of pay transparency laws, so long as the positions being filled are genuinely ineligible for remote work or actually require workers to (at least occasionally) be in the office.
However, given the current pay transparency trend, companies with large and/or remote workforces will likely have to comply with these laws. To do so, many large companies are adjusting their compensation structure and recruitment practices to include standardized job postings that list hourly wage or salary ranges for all positions nationwide. This too creates challenges.
For example, certain laws require any posted ranges to be strictly limited, but a nationwide range often needs to be broad to account for the range of applicants that may be qualified for the position, as well as cost of living concerns. To maintain flexibility with negotiations while staying compliant, some employers are including qualifying language that explains how different factors may impact the range, or are providing variable compensation such as bonuses that may not be included in the required range.
Ray Quinney & Nebeker has one of the largest employment and labor law practice groups in Utah. Our employment group is consistently ranked as one of the top employment and labor practice groups in the Chambers and Partners USA Guide.
We represent employers in all areas of the workplace, including wage and hour issues, discrimination, labor relations, ERISA (employee benefits), unemployment matters, workers’ compensation, civil rights, and other labor issues. Our employment and labor attorneys work closely with employers to help them avoid problems through careful planning, while assisting them in building positive employee relations.
Please contact RQN’s employment section if you have questions or would like assistance on this topic.