Ensuring that people have the opportunity to earn equal pay for equal work is a fundamental concept for employee and labor rights advocates. Congress first passed the Equal Pay Act of 1963 in an attempt to abolish the gender pay gap. The following year, it passed Title VII as part of the Civil Rights Act of 1964, banning discrimination on the basis of race, color, religion, sex, and national origin. Decades later, still facing persistent pay gaps, Congress endorsed the Lilly Ledbetter Fair Pay Act of 2009 as a means of strengthening historical equal pay claims. Similarly, many states regulate equal pay both directly and through antidiscrimination laws. Despite this, significant pay disparities continue to exist in the United States on the basis of race, gender, and ethnicity.
Pay transparency legislation
As a result, state and local legislatures have begun to consider regulations targeting specific employment practices viewed as perpetuating historical wage inequality. Many of these rule makers view secrecy about wages and benefits as a primary culprit. In 2018, California became the first state to institute pay transparency legislation when it passed AB 2282, which allowed job applicants to request the pay scale for an open position for which they had interviewed. Effective January 1, 2020, Colorado took this idea one step further, mandating employers include pay ranges and benefits descriptions in all job postings for Colorado residents.
Numerous cities and states have followed the pay transparency trend, and the legislation roughly breaks down into three categories:
- Rules requiring employers to divulge pay ranges when an applicant requests the information
- Rules requiring the employers automatically provide pay ranges to specific individuals at some point during the interview or hiring process
- Rules requiring pay range disclosures more publicly on job postings or job advertisements.
Pay transparency in 2023
Effective January 1, 2023, California joined the growing list of jurisdictions that require automatic pay range disclosures on job advertisements, instead of merely allowing job applicants to request this information. The state of Washington has followed a similar path, first requiring wage scales upon request, and effective January 1, adopting rules that will obligate covered employers to “disclose in each posting for each job opening the wage scale or salary range, and a general description of all of the benefits and other compensation to be offered to the hired applicant.”
There has also been a wave of pay transparency requirements in the State of New York. Perhaps the most widely discussed, New York City’s pay transparency law went into effect on November 1, 2022, calling for job advertisements to include “minimum and maximum salary” that the employer “in good faith believes at the time of the posting it would pay for the advertised job.” Ithaca, Westchester, and Albany County also have passed local ordinances regarding salary or hourly compensation ranges within job postings. New York state joined the transparency movement in December 2022, when it enacted a pay equity law that will require employers to include the compensation range and a job description in any advertisement for a job, promotion, or transfer opportunity. The statewide requirement will go into effect in New York on September 17, 2023.
How pay transparency affects HR
Pay transparency laws, including job posting requirements, will likely continue to proliferate because state and local lawmakers view them as an effective way to ensure that both applicants and existing employees have equal information about their wages and benefits.
Despite their growing popularity, pay transparency laws raise numerous challenges for human resources professionals and recruiters. Pay ranges may depend on locality pay if, for example, a job may be filled remotely from anywhere in the United States. In addition, constantly reviewing and updating pay bands for the existing workforce and for potential new hires poses operational burdens. Modern HCM software can help in reviewing and updating compensation, as well as standardizing job postings across an organization in order to comply with new and evolving pay transparency requirements.
