Pay Transparency In Recruiting: What Employers Need to Know

October 13, 2022

Topics: Hiring and Recruiting

Throughout the United States, laws are being implemented that require employers to include pay range information in job postings (commonly known as “pay transparency” laws).  Companies need to be mindful of these obligations when hiring.  And because providing pay ranges in recruiting may also raise questions among members of a company’s existing workforce, employers should look beyond the hiring process in considering how to implement these practices.

Most immediately, New York City’s pay transparency law goes into effect on November 1, 2022.  This law is part of a larger trend of state and local governments enacting similar laws across the United States.

Below, we’ve gone into depth about New York City’s pay transparency law and the broader trend. Further below, we’ve shared some strategic action items that companies throughout the United States should consider as these laws become more prevalent.

New York City Pay Transparency Requirements

The New York City law requires covered employers to include a good faith pay range estimate in any posting advertising a job, promotion, or transfer opportunity that can be performed in New York City. The pay range needs to include both a minimum and a maximum hourly rate or salary.

Employers are only required under the law to specify a range for base pay. Although NYC’s law does not require employers to include bonuses, commissions, benefits, or other forms of compensation in postings, some may choose to do so. Also, NYC’s requirements apply to any role that can be performed in NYC, meaning roles that can be performed remotely in NYC must comply even if the employer is located elsewhere.

The job posting requirement applies to all companies with 4 or more employees, at least 1 of whom works in New York City. Employment agencies of any size are also covered. Recruiters retained by an employer should also provide pay range information in any written job opportunities circulated on behalf of companies with New York City employees.

Although all internal or external advertisements and postings must include a pay range, the law does not require employers to create an advertisement or posting to hire employees.

Pay Transparency Trends Across the United States

Mandating wage information in job postings is currently one of the hottest areas of employment-related legislation in the United States.

Colorado led the pack, recently passing a far-reaching requirement that is already in effect.  It is significantly broader than NYC’s law and may even impact companies that do not conduct business in Colorado.

Other places with similar laws that are either in effect or will go into effect soon include: California (effective 1/1/23), Washington (effective 1/1/23), Jersey City, NJ (effective 4/13/22), Westchester County, NY (effective 11/6/22), and Ithaca, NY (effective 9/1/22).  A pay transparency law covering all of New York State was passed by the legislature in June 2022 and is being considered by the governor. We anticipate that a number of other states and localities will consider similar provisions in the future.

Other places have related laws on the books, including requirements that pay scales be disclosed upon request. These include Maryland, Connecticut, Nevada, and Rhode Island, as well as Toledo and Cincinnati in Ohio.

We expect further legislative developments in this area in the coming months and years, especially as more information becomes available about the impact of the laws already enacted.

Action Items For Employers

The stakes for companies are high because of the high visibility of job postings to the public and current employees.  And many of these laws have teeth, granting enforcement agencies and courts the authority to impose penalties, damages, and other potential consequences against employers who are not in compliance.

Because these laws are nuanced and vary from place to place, employers should consult with employment counsel to ensure they understand whether they are covered and, if so, their obligations under each law.

We’ve put together the below list of action-items for companies to consider as they grapple with compliance with new pay transparency laws:

  • Ensure any existing postings that remain visible after the laws go into effect (including on third-party sites, like LinkedIn or Indeed) include the required pay ranges;
  • Instruct recruiters to comply with these requirements, and check external recruiting contracts to ensure they set forth recruiters’ obligations regarding how to engage with candidates on behalf of the company;
  • Consider options for pay ranges for new postings, including especially how broad the range should be (and how this will be perceived by applicants);
  • Examine pay ranges of current employees. You can assume that if there’s a job posting for a company role, current employees in that or a similar role will see it. Disparities between current compensation and the advertised compensation could cause multiple issues, including morale concerns.  It is best to develop a plan to get ahead of any potential conflict related to compensation amounts.  Engage with compensation consultants or similar resources as needed to create competitive and appropriate salary ranges. Because there may be legal implications of doing so, consult with employment counsel as well.

For more information about these or other employment law topics, please contact the authors Jessica Shpall Rosen and George Vallas, or your personal Greenwald Doherty attorney contact.