(Editor’s note: This is an edited excerpt of an article by Jillian T. Stein that appeared in the April 2023 edition of Labor and Employment Law Quarterly. Section members can read the full article and the latest edition here.)
The recent enactment of pay transparency laws has been the latest move in the employment law sector’s effort to achieve pay equity. Why? Although the Equal Pay Act of 1963 was enacted to prohibit pay discrimination based on sex, the wage gap persists, particularly in New Jersey—as reported by the National Women’s Law Center. To close the gap, several states and cities have recently enacted pay transparency laws.
Those who advocate for these laws suggest that the new legal mandates will level the negotiating playing field for women job applicants and applicants of color by providing the applicant with salary information for the job when it is posted.
Employers should prepare now for compliance with the new pay transparency laws—which have already taken effect—and consider implementing policies and procedures that align with the mandates set forth below.
To avoid the penalties and other liability due to noncompliance, employers in affected areas should closely evaluate the pay ranges for all of their current positions. Because pay equity is required by other nondiscrimination laws (not discussed here), if employees become aware of the pay ranges for positions when they are posted because of the pay transparency laws’ requirements, to avoid future claims of equal pay violations, employers should conduct pay audits to ensure compliance with equal pay laws in advance of those postings. In that effort, employers may retain counsel to conduct a pay equity analysis and to recommend modifications to existing compensation, if necessary. Understanding the level of each job position, the type of work involved, and competitive market data are important factors to consider.
In addition, as a practical matter, the pay transparency laws will impact employers who advertise for the same position in multiple jurisdictions if one of those jurisdictions has a pay transparency law. In that circumstance, the employer’s best practice is to ensure that posting is compliant with the most restrictive or onerous laws. Likewise, employers should note in the posting where the position will be performed to avoid allegations that a job could have been performed by a candidate in New York City –because if it could be performed in New York City, then the posting must comply with additional requirements in that locale.
Notwithstanding the pay transparency laws, an employer may be able to depart from the advertised pay range if the employer has a good faith basis and legitimate non-discriminatory reason for offering a different starting salary. For example, an applicant who responds to a job posting but does not have the requisite skill set or experience could be offered a lower salary than advertised. Likewise, someone who is overqualified for the posted position may be offered a salary above the posted range. Of course, any departures from the posted salary range must be based upon objective, legitimate business criteria and be applied equally to both men and women and persons of all races. The employer must make sure the rationale for any departure is documented and consistently applied.
The trending enactment of pay transparency laws makes it clear that employers should be expecting further proliferation of laws of this nature in other jurisdictions and localities. A company can avoid future liability by getting ahead of the game and identifying areas of risk now. Even if an employer operates in a jurisdiction without a pay transparency law, employee dissatisfaction may arise when current employees inevitably compare their compensation to posted salary ranges for similar jobs in the localities that do require such disclosure. Employers should prepare for compliance with the new pay transparency laws and consider implementing disclosure policies that are uniform across all jurisdictions in which the company operates. Aside from these considerations, companies should also consider training managers how best to respond to the inevitable pay questions of employees after salary ranges are posted.