EMPLOYER ALERT:
- “Pay transparency” laws have been adopted in many states and have different requirements for employer job postings, wage range disclosure, use of salary history, and record-keeping, and often protect employees’ discussion of their pay with others. These requirements apply to jobs performed in the respective jurisdiction – whether the employee will work in person or remotely.
- Employers in Maryland and other jurisdictions must understand the laws of the states in which they have or intend to hire employees to ensure their hiring and compensation practices are compliant - to avoid liability for civil or criminal penalties, damages awards, injunctive relief, and other remedies.
- Employers should work with experienced employment counsel to review or modify their current job posting, disclosure, record-keeping, and disciplinary practices, given how quickly the legal landscape is changing.
Historically, employers looking to hire new workers had broad discretion about the content of "help wanted" ads or postings on internet job boards and websites. False information or discriminatory criteria aside, employers were largely free to include as little or as much as they wanted about a job's responsibilities, required qualifications, salary, wages, and benefits. Similarly, it was not unusual for a potential employer to ask an applicant to disclose their salary history during the hiring process, and to discourage discussion of compensation in the workplace after hire.
But the days of companies holding their compensation cards close to the vest are rapidly coming to a close. Over the past several years, pay transparency laws have proliferated in states, counties, and municipalities across the country, creating a multijurisdictional minefield for employers, especially those seeking and hiring remote workers in multiple, far-flung locales.
What is Pay Transparency?
Pay transparency laws aim to advance the cause of pay equity and provide workers with information to help them determine whether they are being compensated fairly and whether their employers are violating state and federal equal pay and other aws by expressly permitting discussion of wages by co-workers and requiring employers to provide wage range information.
Pay transparency laws may also restrict employers’ use of applicant salary history information to break discriminatory patterns of underpayment of women and minorities with the idea that resulting compensation offers will be consistent with the new employer’s wage ranges for candidates with similar experience and qualifications - and will not be influenced by – or perpetuate - prior low pay.
An Ever-Expanding Pay Transparency Landscape
Currently, ten states – including Maryland - have enacted pay transparency laws, while the District of Columbia, Virginia, and 13 other states are considering or have introduced pay transparency legislation. Many municipalities, including New York City, have also enacted their own pay transparency requirements.
The specific requirements under these pay transparency laws vary from jurisdiction to jurisdiction, but all focus on ensuring that prospective job applicants — and current employees — know what to expect regarding compensation and how that compensation stacks up to similarly situated employees. These laws typically address some or all of the following:
- Rights of employees to request wage rate or salary range information for their positions, or to discuss their own – or their co-worker’s - compensation.
- Rights of applicants to request - and the duty of employers to provide - the wage or salary range for the position in question.
- Requirements for employers to disclose wage or salary ranges in job postings (and, in some jurisdictions, information about benefits).
- Restrictions on an employer’s ability to request or consider an applicant's wage or salary history.
- Prohibitions on discipline, discharge, refusal to hire or interview, or retaliation against a person who exercises their rights under applicable law or does not comply with unlawful employer action.
- Requirements for employer record-keeping.
Employers who run afoul of these laws may face a host of remedies, civil and criminal penalties, fines, and other repercussions, making compliance a top priority for any company - and an essential part of recruiting and hiring efforts.
According to data from the National Women's Law Center, approximately 26.6% of the U.S. labor force – almost 44.8 million workers – live in states where employers must share salary ranges in publicized job postings. Those figures would nearly double if all introduced or pending pay transparency bills become law. Given the spread of these laws, and the increase in remote hiring, it is unsurprising that a recent report from the job site Indeed found that the number of U.S. job postings that include salary information more than doubled from 18.4% to 43.7% between 2020 and 2023.
The Right to Discuss Pay
Historically, non-supervisory and non-managerial employees covered by the federal National Labor Relations Act have had the right to discuss the terms and conditions of employment, including compensation and benefits, as part of their right to engage in “protected concerted activity.”
In 2016, the Maryland legislature took aim at compensation discrimination, amending its Equal Pay for Equal Work Act to protect most employees from discipline, discrimination, or retaliation for discussing or inquiring about wages or salaries and prohibiting employers from requiring employees to waive such rights.
The federal government followed in 2018, prohibiting federal government contractors subject to 41 CFR 60-1.35(c) from discharging or discriminating against employees or applicants who “inquire about, discuss, or disclose their own pay or the pay of another employee or applicant” and requiring them to notify applicants and employees of these rights through notice posting and policy distribution.
These actions, in Maryland specifically and in the world of federal government contracting generally, extended the rights of discussion and disclosure to all levels – including supervisors and managers. Other jurisdictions have joined in this effort to ensure compensation practices are transparent, company-wide.
Wage and Salary Range Disclosures to Applicants and Current Employees
Many of the current pay transparency laws require employers to disclose to applicants the wage or salary range for available positions. Depending on the law, the employer may be required to provide the wage or salary range upon the request of the applicant (Maryland, California, and Washington State), at the earlier of the applicant’s request or when the employer tenders a job offer (Connecticut and Rhode Island) or automatically (Nevada).
These laws may also require wage and salary range information (and sometimes, benefits) to be included for job postings for work in specific jurisdictions, whether that work is performed remotely or in person (California, Colorado, Hawaii, New York, and Washington State).
Although Maryland law currently does not require wage or salary range or benefit disclosures in job postings, the new California law illustrates the general trend.
Before enacting its new law, California employers only had to provide job applicants with pay scale information about a position upon the applicant's request. Now, California employers with 15 or more employees must publish the pay scale for a position in any posting or advertisement. If an employer uses a third party to publish or post a job opening, that third party also must include the pay scale in the posting, so employers cannot avoid this obligation by outsourcing.
"Pay scale" is defined in the California statute as the "salary or hourly wage range that the employer reasonably expects to pay for the position." An employer who intends to pay a fixed hourly amount or a set piece rate amount may provide that set hourly rate or set piece rate instead of a pay range. If a position's hourly wage or salary is based on commission, the posting must include the commission range the employer reasonably expects to pay.
A covered California employer would only have to state the hourly wage or salary in the job posting, but not additional compensation or tangible benefits (such as bonuses, health insurance, etc.). In contrast, both Washington State and Colorado pay transparency laws require disclosure of compensation and benefits in job postings for positions performed in those states.
Even though the details of each law vary, employers may also be required to provide wage or salary range information to current employees, whether upon the employee’s request, in connection with an internal transfer or promotion, or under other circumstances established by applicable law. In California, this obligation applies to all employees, regardless of the number of employees.
Salary and Wage History Bans
The flip side to employer salary and wage range disclosure obligations is the prohibitions and restrictions many states have enacted to prohibit or restrict inquiries into a job applicant's pay history during the hiring process.
For example, since 2020, Maryland law has prohibited employers from asking about or otherwise seeking an applicant's pay history until and unless they extend a job offer and the candidate demands a higher compensation rate. [link to prior article https://www.tydings.com/news-insights/five-new-maryland-laws-take-effect-october-1-2020].
A Maryland employer may not retaliate against or refuse to interview or hire an applicant for refusing to provide their pay history; also, the employer may not seek an applicant’s pay history from another source – whether a current or former employer or another employee or agent. Outside of the narrow, counter-offer circumstance, Maryland employers may not screen or evaluate applicants based on pay history. Laws in California, Connecticut, Nevada, and New Jersey also prohibit or restrict the use of pay history. In addition, Executive Order 14069 also addresses consideration of pay history by federal government contractors.
What Employers Should Do Now
Given the wide geographical net many employers now cast for talent and the varying scope, requirements, and application of a growing number of federal, state, and local pay transparency laws and other rules, employers face daunting and expanding compliance challenges.
- Employers should ensure that they understand and comply with requirements in each jurisdiction in which they hire and modify their practices when legal requirements change.
- Employers hiring on a nationwide basis may seek to establish a job posting practice that satisfies the most stringent of the requirements. However, with the fast evolution of these laws, regular monitoring will be required so the practices stay up to date.
- Employers who use outside recruiting agencies should ensure that the agencies’ practices are legally compliant.
- As many pay transparency laws include recordkeeping and disclosure obligations, employers should educate and train responsible staff and hiring managers to handle such responsibilities in a timely manner.
If you have questions about these developments or would like assistance reviewing and modifying your company's hiring, employment, and job posting policies, please contact Melissa Jones at Tydings.
This information has been prepared by Tydings for informational purposes only and does not constitute legal advice.