Many small businesses have job openings because of the tight job market today. NFIB’s Small Business Optimism Index for June 2023 (the latest available) found that 42% of owners reported openings that were hard to fill. If you are one of them, be sure to understand your obligations about giving applicants information about wages, salary, and other information. If you learn you aren’t obligated to disclose pay, you may still want to do so or become obligated in the future. Understand the scope of pay transparency and what you need to do.
What is pay transparency?
Pay transparency laws require employers to disclose salary information to prospective and current employees. Laws have been used by countries around the world (all companies within the European Union must disclose certain pay information) and it’s a growing practice in the U.S. It’s thought that transparency will help with gender wage gap.
Pay transparency means a mandatory requirement to disclose a range of pay for a particular position. Or disclosure may be triggered only if the job applicant or employee requests the information. It may extend beyond basic pay to pay increases, bonuses, benefits, and other information.
The failure to comply with pay transparency laws can result in civil penalties (e.g., New York’s law has a $1,000 penalty for the first violation, $2,000 for the second, and $3,000 for the third).
Where is pay transparency mandatory?
Some states have made pay transparency the law:
Effective in 2023 or earlier: Some pay transparency laws are, or will be, in effect this year:
- California (effective January 1, 2023). The law applies to employers with 15 or more employees.
- Colorado (effective January 1, 2021). The law applies to any company with at least one employee in the state.
- Connecticut (effective January 1, 2021). The law applies to any company with at least one employee in the state.
- Maryland (effective October 1, 2020). The law applies to all employers doing business in the state.
- Nevada (effective October 1, 2021). The law applies to any company with at least one employee.
- New York (effective September 17, 2023). The law applies to employers with 4 or more employees and requires disclosure about whether there is physical labor involved. Note: Pay transparency laws took effect in 3 locations in the state in 2022 (Ithaca, New York City, and Westchester County)
- Rhode Island (effective January 1, 2023). The law applies to any company with at least one employee in the state.
- Washington (effective January 1, 2023). The law applies to all employers posting a job opening.
Effective in 2024 or later:
- Hawaii (effective January 1, 2024). It will apply to employers with 50 or more employees.
- Illinois (effective January 1, 2025). It will apply to employers with 15 or more employees.
What to do if pay transparency is not mandatory?
Employers not subject to state pay transparency law may still want to share information about pay ranges to show fairness. Some actions to take:
- Use pay transparency in job postings and promotions.
- Keep records of pay scales.
“Paying good wages is not charity at all—it is the best kind of business.” ~ Henry Ford
So, if you pay good wages, why not share the information? More than a dozen states are considering pay transparency laws, including Georgia, Massachusetts, and Vermont. And several of those with laws already on the books are looking to strengthen them. Watch what’s happening in your state…or in other states if you are hiring outside your state.
For more information about employment law, see other blogs here.