A Quick Guide to Pay Transparency Laws

A movement to create more transparency when it comes to pay has been gaining momentum, resulting in legislation across several states. In order to maintain compliance when hiring staff, it’s important for businesses to understand these laws and ensure that staff understand them as well.

Our quick guide will help bring you up to speed:

What are pay transparency laws?

These laws require employers to disclose specific pay information. The exact requirements can vary between jurisdictions but may require pay information such as a salary range to be disclosed in job listings or through other channels.

What is the purpose of pay transparency laws?

These laws arose out of a movement to promote fairness and equality when it comes to pay practices because pay disparities based on gender, race, ethnicity, and other factors have been a persistent problem in the workforce. Pay transparency can help reduce these disparities and give workers with equal abilities the chance at equal pay.

Many of these laws include clauses limiting questions about pay in previous jobs. This can help eliminate the problem where an underpaid worker would continue to be underpaid in each subsequent position due to employers using that information to set lower pay rates than they might have for another person.

What states have pay transparency laws?

The following states have enacted pay transparency laws: California, Colorado, Connecticut, Maryland, Nevada, Cincinnati, Rhode Island, and Washington.

In addition to these states, the following cities and counties have pay transparency laws: Jersey City, N.J., Ithaca, N.Y., New York City, Westchester County, N.Y., and Toledo, Ohio.

Because the laws may differ between jurisdictions, it’s important to review the specifics of each area in order to ensure compliance when posting job listings or otherwise doing business in that state. New laws may come into effect soon as well, so be sure to keep an eye on pending legislation as well.

How can you keep track of pay transparency laws?

The Society for Human Resource Management (SHRM) has a great guide to salary history bans and pay transparency laws with information about both state and local laws.

You can also check your state and city laws through your local legislature and city websites.

What is the penalty for not following these laws?

Failure to comply with pay transparency laws can carry hefty consequences. This can include investigation by state agencies, lawsuits, fines, and further actions depending on the infraction. The fines can vary from $500 up to $250,000, so it’s important to make sure you are compliant.

How can pay transparency help your business?

There is ample evidence that pay transparency is seen positively by prospective employees, giving your job listings a boost right from the start. From a job seeker’s perspective, it takes some of the stress and secrecy out of the application and interview process because people can go in knowing that the pay range aligns with their goals. Prospective employees are also aware that transparency demonstrates a company’s commitment to fair pay, creating a favorable impression.

As a result, some businesses are making it standard practice to list the pay range in order to simplify compliance with pay transparency laws and take advantage of the reputational boost.

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