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GeneralInsightLabor and EmploymentMichele Spillman

Pay Transparency: What It Is and Why You Should Care

By October 5th, 2023No Comments

Close up of US 20 dollar bill shot from beneath to make the bill semi transparent, symbolizing transparency in government and transparency in business, over white.

Originally published in Dallas Bar Association Headnotes on Page 14 of July 2023 Publication.

By: Michele C. Spillman

Michelle C Spillman

Phillips Murrah Director Michele C. Spillman

To combat pay discrimination in the workplace, cities and states across the country are implementing pay transparency laws. Pay transparency is the practice of employers making pay information accessible to existing and prospective employees. Pay transparency laws require employers to disclose wage ranges and benefits information in job postings or provide pay information to applicants and employees.

Despite federal and state equal pay laws, statistics show that women are paid less than men for the same positions. According to the latest U.S. Census figures, the current gender pay gap is 84 percent for full-time workers. This means that, on average, a woman earns just 84 cents for every dollar a man earns. Pay transparency laws aim to close the pay gap and eliminate discriminatory pay practices by removing the historical secrecy around pay information.

Whether an employer must comply with pay transparency laws depends on the jurisdiction in which it operates. The following states currently have pay transparency laws: California, Colorado, Connecticut, Maryland, Nevada, New York, Rhode Island, and Washington. Some cities also have pay transparency ordinances, including Cincinnati and Toledo, Ohio, and several cities in New York and New Jersey.

Certain pay transparency laws require employers to publish pay ranges for open positions in job postings. Others require employers to include a general description of employment benefits, including health care, other insurance, retirement benefits, and leave policies, as well as bonuses, commissions, profit-sharing, and stock options. A handful of pay transparency laws require employers to disclose wage ranges to current employees when they move into a new position and upon an employee’s request during employment.

While Texas does not have a pay transparency law, multi-state employers and those with remote workers need to understand the laws that may apply to their businesses. Pay transparency is a rapidly developing area of law, and we expect additional states and cities to adopt pay transparency legislation in the coming years.

Companies with remote workers may be required to comply with the pay transparency laws in the states where their remote employees live and work. For example, New York’s pay transparency law, which goes into effect on September 27, 2023, requires employers to disclose the compensation or range of compensation in any advertisement for a job, promotion, or transfer opportunity. That law will apply to postings for remote jobs that will be physically performed in New York. As such, if you are a Texas employer with employees who live and work remotely from New York, you must comply with New York’s pay transparency law.

While some pay transparency laws apply only to employers with 15 or more employees living within the applicable state, others apply to employers with even one employee in that jurisdiction.

Given the prevalence of remote work arrangements, employers must be aware of any applicable pay transparency requirements. In Colorado, the first state to enact a pay transparency law, out-of-state employers began posting jobs for remote work that could theoretically be performed in Colorado. They tried to skirt the state’s pay transparency requirements by including language in their job postings saying, “Colorado applicants need not apply.” The Colorado Department of Labor quickly ended the practice, finding that non-Colorado employers cannot avoid compliance with the state’s pay transparency law by including this type of disclaimer language in their job postings. Washington recently amended its pay transparency law to provide the same protection, and other states will likely follow suit.

Failure to comply with pay transparency laws could result in an administrative enforcement action or private lawsuit. Some jurisdictions also allow significant civil penalties for non-compliance—from up to $10,000 per violation in California to up to $250,000 per violation in New York City.

A report released by Austin-based Hiring Lab in March 2023 revealed that more than 40 percent of U.S. job postings now include employer-provided salary information. The report cites pay transparency laws as a driving factor but also concludes that a younger workforce, often fueled by social media, demands pay transparency. A recent study by ResumeLab, a career advice website, found that four out of five workers said they are unlikely to apply for a job when the listing does not disclose a pay range. These new trends beg the question whether certain employers should adopt pay transparency policies in the interest of attracting talent, even in states without pay transparency laws.

Employers also should be aware of the legal risks associated with disclosing pay information, including possible exposure to claims of equal pay violations and discrimination. An employer should consult legal counsel before adopting a pay transparency policy to ensure its pay practices can withstand scrutiny.

About the author:

Michele C. Spillman is a Director with a background in both commercial litigation and labor & employment law. She offers clients comprehensive solutions to meet their business goals.

CONTACT: | 469.485.7342

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