Proliferation of Pay Transparency Laws Mean Distributors Must Put Compensation Cards on the Table in Job Postings

Historically, distributors seeking new employees had a pretty wide berth in terms of what was disclosed or not disclosed in classified ads and other job postings, putting aside false and misleading information or prohibited discriminatory hiring criteria. Such information ranged from position duties and responsibilities, required or preferred qualifications, to salary, wages, and benefits. Similarly, it was standard operating procedure for distributors to ask a job seeker to disclose their compensation history or expectations as part of the hiring process. 

Unlike the Equal Pay Act of 1963 – which prohibits employers from paying employees differently based on sex, and state law equivalents providing the same rights based on other protected categories, Pay Transparency Laws require disclosure of certain information and expand what pay information applicants and current employees are entitled to and how their pay compares to similarly situated employees. Many pay transparency laws also involve prohibitions on asking applicants about their pay histories.  

An Ever-Expanding Pay Transparency Landscape  

Currently, 12 states have enacted pay transparency laws, while several other states are considering or have introduced such legislation (some of which like Illinois are not effective until next year). Many municipalities and other jurisdictions (e.g., Washington DC) have also enacted their own transparency ordinances. For example, New York has a state pay transparency law, but it builds on New York City’s pay transparency ordinance. 

The proliferation of “pay transparency” laws and ordinances across the country has created a complex multijurisdictional web that can easily ensnare distributors, especially those seeking and hiring workers in multiple states or who have hybrid work conditions that trigger statutory or local law-ordinance coverage. 

Salary and Wage Range Disclosures to Applicants and Current Employees 

Each pay transparency law  has its own nuances in terms among other elements of (a) which employers are covered (in terms of the number of employees), (b) the type of information that employers must disclose in job listings and to current employees,  (c) the scope of coverage, (d) who enforces these laws, and (e) the nature of remedies and penalties for violations of these laws. Examples from multiple jurisdictions are helpful to better understand the nuances of pay transparency legislation. 

In New York, all covered employers and employment agencies need to include the following information in any advertisement for a job, promotion, or transfer opportunity that can or will be performed, at least in part, in New York State:    

• The compensation or a range of compensation for such job, promotion, or transfer opportunity; and 

• The job description for such job, promotion, or transfer opportunity, if such description exists. 

As used in New York’s law, the “range of compensation” that employers must include in a job ad or posting means: “the minimum and maximum annual salary or hourly range of compensation for a job, promotion, or transfer opportunity that the employer in good faith believes to be accurate at the time of posting.”  

As used in Illinois’ laws, distributors are required to disclose pay scale and benefits, which include wage/salary, or wage/salary range, plus a general description of benefits offered (links to such information can satisfy this prong in Illinois). 

Like many other pay transparency laws, both New York’s and Illinois’ laws also cover existing employees, who are entitled to receive such information upon request. Some also require internal postings, within a set time, after an external job posting. As with most employment laws, most pay transparency laws contain provisions that prohibit retaliation against those who exercise their rights or report alleged violations. Additionally, most laws include civil penalties for non-compliant employers, and some also afford a private right of action to aggrieved employees and applicants. For example, in Illinois, the Department of Labor can investigate claims and review records, and penalties for non-compliance can be quite steep, up to $10,000 for multiple offenses.  

Salary History Questions Forbidden In Hiring Process  

While employers in many states may now have an obligation to disclose salary information, the converse is that they may also be prohibited from asking job applicants about their salary history during the hiring process. For example, Maryland’s law bans employers from asking about or otherwise seeking an applicant’s salary history until and unless they extend a job offer. Even then, the purpose of the inquiry must be to justify a compensation offer that exceeds the initial one. Illinois, similarly, prohibits a covered employer from seeking the wage or salary history, including benefits and other compensation, of a job applicant, from any current or former employer; but it is permissible for covered employers to inquire about the expectations of applicants as to wage, salary, benefits and other compensation.  

How Distributors Can Adapt to The New Pay Transparency Landscape 

Given the varying scope, requirements, and application of a growing number of state and local pay transparency laws, distributors can face significant compliance challenges. One area of concern is what positions are “covered.” For example, Illinois’ transparency law applies to “positions” that will be physically, in whole or part, performed in Illinois and out-of-state for hybrid positions that report to a supervisor, office, or other worksite in Illinois. Distributors should also be mindful (and make inquiries as to proper application) of transparency laws when they use recruiting agencies or other third parties to find and screen applicants. Under many pay transparency laws, violations thereof can be held against both the third party and the employers.  

Solving the web of wage transparency laws is complex, and directly affected by the scope of a distributor’s operations. Global policies may work (based on the most stringent policy requirements), but these laws are ever evolving. At a minimum, distributors should ensure that their human resource personnel and other appropriate staff are trained on the requirements of applicable pay transparency laws, including record-keeping obligations. 

If you have questions or desire follow up concerning pay transparency laws, please contact me at 312-840-7004 or fmendelsohn@burkelaw.com.