Pay Transparency Laws Are Expanding Across the Nation. What’s an Employer to Do?

Pay transparency laws that require disclosure of anticipated compensation for open positions (and sometimes for current positions) are increasingly being passed by states and local jurisdictions. New York City’s law goes into effect on Nov. 1, and a New York State pay transparency bill is sitting on Gov. Kathy Hochul’s desk awaiting her signature. These laws will significantly impact both employers’ recruiting strategies and employee retention.

New York City’s Salary Disclosure Law Goes Into Effect on Nov. 1

New York City’s salary transparency law goes into effect on Nov. 1. As we previously described, the law requires covered employers who post a job, promotion or transfer opportunity for a position that can or will be performed in New York City to include a salary range for the position. The minimum and maximum hourly wages or salaries for an advertised position should represent the range that the employer in good faith believes at the time it will pay for such position. If the compensation is fixed, the posting is permitted to indicate, for example, “$20 per hour” or “$50,000 annually,” rather than a range. Under the New York City law, the salary that employers must disclose need not include “other forms of compensation or benefits offered in connection with the advertised job,” such as health insurance, severance pay, overtime pay, commissions, tips, and bonuses.

The law applies to all employers who have four or more employees (including, for this purpose, full- or part-time employees, interns, domestic workers, and independent contractors) so long as at least one of the employees works, in whole or in part, in New York City (whether from an office, in the field, or remotely from an employee’s residence in New York City). The law also covers employment agencies. However, temporary help firms, such as staffing agencies, are exempt from the salary disclosure requirements.

The law applies only to positions that are to, or can, be performed, even in part, in New York City. As a result, postings by a covered employer for remote positions that could, in theory, be performed in New York City must comply with the law.

The law may be enforced by civil lawsuits, complaints to the Commission on Human Rights, and the Law Enforcement Bureau, but, as a result of an amendment of the law, lawsuits alleging violations may be brought only by current employees — applicants cannot commence litigation against a prospective employer for allegedly failing to include a salary range in a posting for an open position. And individuals cannot bring claims against former employers.

For first-time violations, employers and employment agencies alleged to have violated the law will have 30 days from the date of receiving notice of the alleged violation to show the Commission that they have remedied the violation by modifying the posting, and those that do so will avoid any monetary penalty. However, by submitting proof of a cure, an employer admits liability, such that any subsequent violation could result in a civil penalty of up to $250,000.

Here are some steps employers can take to comply with New York City’s salary disclosure law, effective Nov. 1:

• Review existing covered job postings;
• determine in good faith the target salary range for positions that will be posted or advertised; and
• bring into compliance any existing or anticipated postings.

New York State’s Salary Disclosure Law, Once Signed, Is Expected to Take Effect in 2023

A similar pay transparency law was passed by the New York State Legislature in June 2022 and is now before Gov. Hochul for consideration. The state law, if enacted, would amend the New York Labor Law to include a new section, Section 194-b, requiring private employers with four or more employees to disclose the minimum and maximum hourly wages or salaries that a covered employer in good faith believes it would pay for the position at the time of the advertisement. Under the new law, covered postings would also be required to include a job description if one exists and, if applicable, a general statement that compensation for the posted position would be based on commission. Gov. Hochul is expected to sign the bill, which would go into effect 270 days after it is signed into law.

If enacted, New York State’s law would add three requirements to New York City employers’ obligations under city law: (i) a posting must include a job description if one exists; (ii) a posting must include a general statement that compensation is based on commission, if applicable to such position; and (iii) employers must keep and maintain records of compensation history for posted jobs, promotions, and transfer opportunities.

The bill provides that it will not supersede or preempt any local law. This means that employers covered by both the state and city laws would be required to comply with both. Business advocacy groups have urged Gov. Hochul to decline to sign the bill without modifications. Specifically, the Business Council of New York State has advocated that the bill be amended so that it preempts local salary disclosure ordinances (other than New York City’s law), with the goal of preventing inconsistent salary disclosure laws across the state. The Partnership for New York City is urging Gov. Hochul to clarify that New York businesses do not have to include salary ranges in postings for remote jobs that can be performed outside New York State. Any changes Gov. Hochul makes to the bill would have to be approved by the state legislature during its next session.

Individuals alleging that they have been affected by a violation of the state law, including applicants, could file a complaint with the state Commissioner of Labor. A first violation of the state law would expose an employer to a civil penalty of $1,000 (a departure from the city’s law, which allows employers to avoid a monetary penalty for a first violation if they fix it within 30 days of receiving notice of the violation), $2,000 for a second violation, and $3,000 for a third or any subsequent violation. The state law would also prohibit employers from retaliating against individuals who exercise their rights under the law.

Employers will have 270 days from Gov. Hochul’s approval of the law to prepare for compliance.

The Expansion of Salary Disclosure Requirements in Jurisdictions Outside New York

Pay transparency requirements, aimed at greater pay equity across genders and races, are currently on the books in several states and cities, with more to come. California, Colorado, Connecticut, Maryland, Nevada, Rhode Island and Washington as well as localities in New York (Ithaca, New York City and Westchester County), New Jersey (Jersey City) and Ohio (Cincinnati and Toledo) have enacted laws that require employers to provide salary ranges to applicants and employees. These laws take several different approaches:

• Some, including those in New York City, in New York State and in California, require disclosure in any posting or advertisement for a position;
• some, including those in California, in Connecticut and in Maryland, require disclosure to applicants upon request;
• and some, including those in Colorado and in Washington, require disclosure of other compensation or benefits that would apply to the advertised position.

One example that will affect many employers is California’s pay disclosure law, which goes into effect on Jan. 1, 2023. It requires employers with at least 15 employees to disclose the hourly or annual salary range the employer reasonably expects to pay for the position in any job posting and to report to the state annual pay data on employees hired through labor contractors. In addition, employers in California already are required to disclose the salary range for an open position to an applicant who requests the information, and the new law also will require employers to (i) provide the salary range for an existing employee’s current position on reasonable request and (ii) maintain records of job title and wage rate history for each employee for the duration of their employment plus three years.

The chart below highlights compensation disclosure requirements in place in jurisdictions in New York, including those implemented by cities and counties.

Conclusion

Employers should take note of the pay transparency requirements now in place in a variety of jurisdictions and develop plans to identify compensation ranges for open positions and ensure compliance with applicable laws. We will continue to monitor and report on developments regarding pay transparency laws taking effect in the future.

Please contact a member of Kramer Levin’s Employment Law department with any questions or concerns about the topics raised in this alert.