Employers: Make Sure You’re Crystal Clear on Pay Transparency
Pay transparency is on the rise. To date, eight states and multiple cities and localities have already enacted pay transparency statues – and several more jurisdictions have pending legislation. What do these laws require, and what should employers expect if they become subject to them?
Generally, these laws have three different components. They could have all three components or just one, depending on the individual statute:
- Employers are prohibited from considering a candidate’s salary history when making hiring or compensation decisions.
- Employers must disclose compensation information (usually in the form of a salary range) to job candidates. Employers typically must do this during the hiring process upon a candidate’s request, or publicly disclose a salary range by including it in a job posting. The amount of information employers must disclose can also vary – in some states, employers must disclose a general description of all benefits and other compensation in addition to a salary range.
- Employers must maintain records or report on historical salaries for various positions.
Currently, Ohio does not have a state-wide pay transparency statute. However, city ordinances in Toledo and Cincinnati require that certain employers provide the pay scale to an applicant who has received a conditional offer of employment.
What does it mean for your organization if you are subject to pay transparency laws or become subject to one in the future? Keep the following practical considerations in mind:
- Multi-state employers. Employers with locations in multiple states should stay up to date on new and pending legislation. Additionally, be mindful of the differences between the laws – what do you have to disclose, at what point in the hiring process do you have to disclose it, etc.? Consider whether you should implement state-specific practices to comply, or create a nationwide policy to comply with the most restrictive laws for jurisdictions in which you operate.
- Remote-only positions. Pay transparency poses a particularly challenging question for remote-only postings, which could be theoretically filled by a candidate from any state. So, what if an employer is based in a state without pay transparency laws, but an applicant lives in a state with pay transparency requirements? Some states have resolved that employers must take notice of a remote applicant’s physical location to ensure compliance with laws that apply to the applicant. In other words, if the applicant lives in a jurisdiction with pay transparency laws, the employer must comply with those laws regardless of where the employer is based. But in other states, this is still unclear.
- Training. Employers should train HR staff, managers, and others who are interviewing applicants to make sure they are aware of and complying with these laws, particularly in jurisdictions where employers are only required to disclose pay upon an applicant’s request.
- Discrimination claims. Along with the rise of pay transparency laws, employers may see an increase in discrimination litigation based on inequitable pay. So, employers should be proactive and consider implementing routine audits into their pay practices and compensation structures to identify these potential areas of inequity and work to rectify them - instead of discovering them for the first time in a lawsuit.
- Reporting obligations. Employers should keep detailed records of job titles, responsibilities, and salaries in the event they are called on to report on this data.
- Be proactive. Avoid perpetuating pay inequities when determining compensation by focusing on salary expectations and job responsibilities – instead of salary history.
