Pay Transparency and Equity Issues

History of Pay Inequality

Pay discrimination is not new in the United States. In 1963, Congress enacted the Equal Pay Act to address a centuries-old problem of sex-based discrimination in the payment of wages by employers and labor organizations. A year later, Title VII of the Civil Rights Act (“Title VII”) prohibited wage discrimination based on sex, race and other protected categories. States also passed their own equal pay laws aimed at breaking the cycle of unfair compensation. Despite efforts at the federal and state levels to break the cycle of unfair compensation, the pay gap between men and women continues to persist. Recently, states have taken a new approach to alleviating gender- and/or race-based wage disparities by enacting salary history bans and pay transparency laws.

Federal Protections

The Equal Pay Act of 1963

The Equal Pay Act prohibits sex-based employment discrimination. “No employer having employees subject to any provisions of this section shall discriminate, within any establishment in which such employees are employed, between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which he pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions...”29 U.S.C. §206(d)(1). The Equal Pay Act was an effort to provide a remedy for what was perceived to be a serious and endemic problem of employment discrimination in private industry that reflected “an ancient but outmoded belief that a man, because of his role in society, should be paid more than a woman even though his duties are the same.”

If there is an inequality in wages between men and women who perform substantially equal jobs at the same establishment, the employer is required to raise wages to equalize pay. Employers also are prohibited from reducing wages in order to comply with the Equal Pay Act. 29 USC §206(d).

The law provides guidelines for when unequal pay is permitted – specifically, when there is: (a) a bona fide seniority system; (b) a merit system; (c) a system that measures earnings by quantity or quality of production; or (d) a differential based on any factor other than sex (also known as the four affirmative defenses). 29 U.S.C. § 206(d)(1).

Other Equal Pay Laws

Following the passage of the Equal Pay Act, Congress enacted other laws to reduce employment discrimination based not only on sex, but also on other protected categories.

• Title VII of the Civil Rights Act of 1964 bans employers from discriminating based on race, color, religion, sex or national origin.

• The Pregnancy Discrimination Act of 1978 expands the protections of Title VII by making it illegal for employers to discriminate against women on the basis of pregnancy, childbirth or related medical conditions.

• The Lilly Ledbetter Fair Pay Act of 2009 strengthens worker protections against pay discrimination by overturning the Supreme Court's decision in Ledbetter v. Goodyear Tire & Rubber Co., Inc., 550 U.S. 618 (2007), which restricted the time period for filing complaints of wage discrimination under various federal anti-discrimination laws. The Act states that pay discrimination occurs, under Title VII, the Americans with Disabilities Act of 1990 and the Age Discrimination in Employment Act of 1967, every time wages, benefits or other compensation is paid.

State Protections

Many states have enacted their own statutory protections to address pay inequity and to protect job applicants and current employees who may be subject to discrimination based on sex (including pregnancy, childbirth and related medical conditions), race, religion, disability and age. These laws bar employers from: (1) prohibiting employees from inquiring about, discussing, or disclosing their own wage or that of their colleagues; (2) requesting salary history and compensation information from job applicants and their prior employers; and (3) advertising jobs, promotions and transfer opportunities without disclosing the pay or pay range.

Salary History Bans

Salary history bans prohibit employers from inquiring about job applicants’ wage or salary history at a prior employer as a condition for hiring or determining the salary to offer for a position. They may also prohibit employers from accessing and considering current employees’ salary in determining the salary to offer for a promotion. Below is a list of states with some type of salary history ban and their effective dates:

Pay Transparency Laws

Pay transparency laws provide job applicants with transparent information about compensation in an effort to close the wage gap. Employers are required to disclose the minimum and maximum pay for a position to job applicants at some point in the hiring (or promoting) process. Some states have extended the requirements to current employees, requiring employers to disclose the pay range for the current employee’s position.

California

Since 2018, the California Equal Pay Act (“CEPA”) has prohibited employers from asking applicants about their salary history, including compensation and benefits, during the hiring process. California also requires employers to provide the pay scale for a position upon reasonable request by an applicant. However, in 2022, California passed SB 1162, which expanded the disclosure requirements imposed on employers, effective January 1, 2023.

Covered Employers

California’s disclosure laws apply to employers with 15 or more employees nationwide, and only one employee needs to be physically located in California for the law to apply. Moreover, the Department of Labor Standards Enforcement (DLSE) has interpreted the job posting requirement to apply if the posted position “may ever be filled in California, either in-person or remotely.”

If the employer utilizes third parties to “announce, post, publish, or otherwise make known a job posting,” the employer must provide the pay scale to the third party that, in turn, must include the pay scale on any job posting.

Disclosure Requirements

In addition to requiring disclosure of pay scale information to applicants, upon request, California employers are now required to include pay scale information in any job posting and provide existing employees with pay scale information for the employee’s current position upon request. The DLSE interprets the law to require the pay scale for the position to be included directly within the job posting. In other words, employers cannot require the applicant to go elsewhere to find the pay range.

“Pay scale” means the base salary or hourly wage range or set rate that the employer “reasonably expects” to pay for the position. The DLSE recently clarified that the “pay scale” need not include bonuses, tips, or other benefits. However, piece rate and commission wages must be included in the pay scale information if the job position compensates employees either in whole or in part based on a task, piece, or commission. In such circumstances, the job posting or disclosure to a current employee must include the piece rate or commission range that the employer “reasonably expects to pay for the position.”

Recordkeeping and Penalties

California employers must keep records of wages, wage rates, job classifications, and other terms and conditions of employment for a period of three years. Additionally, starting January 1, 2023, an employer must keep records of a job title and wage rate history for each employee for the duration of the employment plus three years after the end of the employment.

The DLSE can inspect these records to determine if there is a pattern of wage discrepancy.

If an employer violates the disclosure requirements, an employee or applicant who claims to be aggrieved may file a written complaint with the DLSE within one year after the date they learned of the violation. An employee or applicant may also file a civil action for injunctive relief or any other relief that a court deems appropriate.

The DLSE may order employers to pay a civil penalty between $100 and $10,000 per violation. However, employers can avoid the penalty for a first time violation if the employer demonstrates that all job postings for open positions have been updated to include the required pay scale information.

Colorado

Colorado’s Equal Pay for Equal Work Act (“EPEWA”) requires employers to include compensation and benefits information in all job postings and notifications of promotional opportunities.

Covered Employers

The EPEWA covers all employers, public or private, that employ at least one person in Colorado. Employees of covered employers must also comply with the pay transparency requirements of the EPEWA.

The EPEWA does not apply to employers with no employees in Colorado. If an employer has no employees in Colorado at the time of its hiring or promotion decision, then the requirements of the EPEWA do not apply to the employer for that hiring or promotion decision, even if it considers Colorado applicants, or ultimately hires someone who would work in Colorado.

The EPEWA does not apply to a third-party that shares or re-posts another employer’s job. An employer is not liable for violation of the EPEWA if it has a compliant posting, but then a third party, without being hired or instructed by the employer, re-posts the employer’s job without the required information.

Covered Job Advertisements

Employers are not required to advertise job openings, or have job postings, except as needed to notify existing employees of promotional opportunities. Compensation and benefits must be disclosed only if an employer chooses to have a job posting. If an employer advertises or posts a job opening, the employer must disclose compensation and benefits information in each posting for each job posted. A job posting includes any electronic or hard copy communication that the employer has any specific job(s) available or is accepting job applications for a particular position.

Employers do not need to disclose compensation and benefits information in job postings for jobs that will be performed entirely outside of Colorado (including non-Colorado jobs that may include modest travel to Colorado), even if the job posting is published in Colorado (or is an online posting that reaches Colorado).

Remote work performable in Colorado or elsewhere for a covered employer must comply with the EPEWA. A remote job posting, even if it states that the employer will not accept Colorado applicants, remains covered by the EPEWA.

Employers do not need to disclose compensation and benefits information in printed or hardcopy job postings that are posted or distributed entirely outside of Colorado. For example, compensation and benefits need not be included in a printed advertisement or posting entirely in another state, but must be included in an online posting, because online postings are accessible by Colorado residents.

An employer does not need to disclose compensation or benefit information in a help wanted sign or similar communication stating only generally (i.e., without listing specific positions) that an employer is hiring.

Job Advertisement Disclosure Requirements

Employers must include in each job posting (1) the rate of compensation (or a range thereof), including salary and hourly, piece, or day rate compensation; (2) a general description of any bonuses, commissions, or other compensation; and (3) a general description of all benefits the employer is offering for the position.

Benefits that must be generally described include health care, retirement benefits, paid days off, and any tax-reportable benefits, but not minor “perks” like use of an on-site gym or employee discounts. At a minimum, employers must describe the nature of these benefits and what they provide, not specific details or dollar values — such as listing that the job comes with “health insurance,” without needing to detail premium costs or coverage specifics. Employers cannot use an open-ended phrase such as “etc.,” or “and more,” rather than provide the required “general description of all of the benefits.”

An employer may post compensation as a range from the lowest to the highest pay it actually believes it might pay for the particular job, depending on circumstances such as employee qualifications, employer finances, or other operational considerations. If the pay might be different inside and outside Colorado, the range should be what the employer would pay in Colorado. A range’s bottom and top cannot include open-ended phrases like “$30,000 and up” (with no top of the range), or “up to $60,000” (with no bottom). An employer may ultimately pay more or less than a posted range, as long as the range, at the time of posting, was what the employer genuinely believed it would be willing to pay for the job.

For jobs that earn tips, the Act requires “the hourly or salary compensation” the employer will pay be included in the job posting. A posting does not need to, but may, give an estimated amount of tips, as long as the posting still specifies what the employer itself will pay, aside from any tips.

Electronic postings (e.g., webpages or emails), need not include all required compensation and/or benefits, if they link to such information — as long as the posting makes clear that the link gives access to compensation and benefits for each specific job posted. It is the employer’s responsibility to assure continuous compliance with functionality of links, up-to-date information, and information that applies to the specific job posting (e.g., not a single pay “range,” or identical benefits, for multiple jobs for which the actual pay ranges or benefits would be different).

Recordkeeping Requirements

For each employee, an employer must keep records of the employee’s job description and compensation (including salary or hourly wage, benefits, and all bonuses, commissions, and other compensation received). Records must include any changes to job description or compensation over time.

Employer must maintain these records for the duration of the employee’s employment plus two years thereafter. This recordkeeping requirement only applies to employees in Colorado.

If a court finds that an employer failed to comply with record keeping requirements an employee is entitled to a rebuttable presumption that the records contained information favorable to the employee’s claim. The employee is also entitled to a jury instruction that the employer’s failure to keep records can be considered evidence that the violation was not made in good faith.

Penalties and Fees for Violations

Any person aggrieved by (i.e., witnessed, suffered, or injured by) a perceived violation may file a complaint with the Colorado Department of Labor (“CDOL”) within one year of learning of the violation. A person may file an anonymous tip with the CDOL. The CDOL may also initiate its own investigation based on information received without a formal complaint.

If the CDOL determines a violation has occurred, it may issue a fine of $500 to $10,000 for each violation. Failure to include compensation and benefit information in one or more postings for a job is one violation regardless of the number of postings listing that job. The CDOL may waive or reduce particular fines for good cause.

Currently, the CDOL is prioritizing proactive outreach and education over penalties. Accordingly, when it receives a complaint or information about a potential violation it has offered employers an opportunity to cure the violation before it initiates a formal investigation that could result in fines. It is uncertain how long the CDOL will continue the practice of offering an opportunity to cure a violation.

No civil action is available. However, if an employee brings a claim for wage discrimination based on sex and the court finds that the employer violated the EPEWA’s pay transparency requirements, then the court may order “appropriate relief.”

New York State

On December 21, 2022, Governor Kathy Hochul signed New York State's pay transparency bill and the new law goes into effect on September 17, 2023. In advance of the September 17 effective date, the state legislature passed and Governor Hochul signed an amendment, on March 3, 2023, to address many open questions.

Covered Employers

The state law applies to employers with four or more employees. Presently, it is unknown whether all four employees need to be employed within the state or whether an employer is covered if it employs at least one employee in the state but has at least four employees total regardless of location.(New York State’s paid sick leave law counts employees nationwide so that in-state employees receive the maximum sick leave allowance for working for large multi-state employers who may have a small footprint in the state.)

Covered Advertisements and Recordkeeping Requirements

Before the law was amended, it required the disclosure of salary ranges in written advertisements and postings for jobs, promotions or transfer opportunities that could be performed, at least in part, in New York State. The amended law now requires disclosure if the job, promotion or transfer opportunity will be physically performed outside of New York but reports to a supervisor, office, or other work site in New York. The amended law provides a definition for advertisements – making “available to a pool of potential applicants for internal or public viewing, including electronically, a written description of an employment opportunity” – that aligns with New York City’s pay transparency law. The minimum and maximum salary or hourly range of compensation must be based on the employer’s good faith belief of what the employer would pay at the time of the posting of the advertisement. Unlike the NYC law (addressed below), if the position is solely compensated on commission, that must be included in the advertisement in order to comply with the state law.

Additionally, the amendment removes the requirement that employers maintain records of the history of salary or hourly ranges and job descriptions, to the extent they exist, for each position advertised. However, employers may want to maintain such record in case it needs to prove compliance with the state’s pay transparency law.

Fees and Penalties

Like many New York State employment laws, the law has an anti-retaliation provision barring employers from refusing to interview, hire, promote or employ a job applicant or current employee for exercising any rights provided by the law. Only the state’s commissioner of labor is authorized to investigate and prosecute violations. Violators could be subject to civil penalties not to exceed $1,000 for the first violation, $2,000 for the second violation and $3,000 for the third and all subsequent violations.

The Department of Labor is expected to promulgate regulations about the law so there will be more clarity regarding many unanswered questions.

ADDITIONAL STATES WITH PAY TRANSPARENCY LAWS

As of March 1, 2023, there are five additional states with pay transparency laws. Below is a brief summary of those laws:

• Connecticut’s transparency law went into effect on October 1, 2021, and applies to employers who have one or more employees in the state. Employers may not fail or refuse to provide applicants with the wage range for the position for which they are applying, upon the earliest of either (a) an applicant's request, or (b) prior to or at the time a job offer is extended. Additionally, employers may not fail or refuse to provide employees with the wage range for their position upon their hiring, a change in their position with the employer, or their first request for a wage range. An employer who violates this law may be found liable for compensatory damages, attorney's fees and costs, punitive damages and other legal and equitable relief.
• Maryland’s Equal Pay for Equal Work Law (“EPEWL”) took effect on October 1, 2020. It requires all employers, who engage in a business, trade, industry, profession, trade or other enterprise in the state, to provide applicants, upon request, with the wage range for the position for which they are applying. Further, employers are prohibited from retaliating against or refusing to interview, hire, or employ applicants because they request the wage range for the position for which they are applying. Maryland’s Division of Labor and Industry enforces the EPEWL in conjunction with the state’s attorney general’s office. Violations range from having to comply with the Commissioner of Labor’s letter/order compelling compliance to civil penalties of up to $600 for each applicant for employment for whom the employer is not in compliance if the violation occurred within three years after a previous determination that a violation had occurred.
• Since October 1, 2021, all private employers in Nevada are required to comply with Nevada’s Pay Equity Law for employment within the state. An employer must provide a position’s salary range or rate of pay to applicants after an initial interview. Employers are also required to provide the wage or salary range or rate of pay for promotions or transfers to new positions if employees have (a) applied for the transfer or promotion; (b) completed an interview for or been offered the transfer or promotion; or (c) requested the wage or salary range or rate of pay for the promotion or transfer. Employers who violate Nevada’s Pay Equity Law may be subject to penalties, including civil actions byaggrieved employees and applicants, actions by the Labor Commissioner, and administrative penalties of up to $5,000 for each violation and costs for the proceeding including investigative costs and attorneys’ fees.
• On January 1, 2023, Rhode Island’s Pay Equity Act was expanded to require employers, with at least one employee in Rhode Island, to provide a position’s wage range to applicants for employment upon request. Employers should provide the wage range to an applicant prior to discussing compensation. For current employees, an employer must provide the wage for their current position both at the time of hire, when they move into a new positon, and upon their request. The Act includes an anti-retaliation provision. In addition to administrative proceedings and penalties by the state’s Department of Labor and Training, alleged violators may be sued civily, under certain conditions, and be liable for compensatory or special damages, equitable relief, and reasonable attorneys’ fees and costs.
• In 2019, Washington State enacted the Equal Pay and Opportunity Act(“EPOA”) which required employers, with 15 or more employees, to disclose the position’s minimum wage or salary upon the applicant’s request, after a conditional offer of employment. Effective January 1, 2023, EPOA now requires employers to disclose, in each job posting, the wage scale or salary range, and a general description of all benefits and other compensation. Upon request of an employee offered an internal transfer to a new position or a promotion, employers must provide the wage scale or salary range for the employee's new position. Aggrieved applicants and employees can file a complaint with the Department of Labor or a civil lawsuit against the employer in court. Penalties for employers out of compliance include: a civil penalty ranging from $500 for the first violation to $1,000 (or 10% of the damages) for a repeat violation, a citation and/or notice of assessment, an order to pay actual damages to applicant or employee, double statutory damages (or $5,000 which is greater), interest, investigative costs, attorneys’ fees, and other appropriate relief.

Cities and Counties with Pay Transparency Laws

Several cities and counties have also adopted pay transparency laws, including:

• Albany County, New York
• Cincinnati, Ohio
• Jersey City, New Jersey
• Ithaca, New York
• New York City, New York
• Toledo, Ohio
• Westchester County, New York

New York City

The salary disclosure law, which went into effect November 1, 2022, makes it an “unlawful discriminatory practice” under the New York City Human Rights Law (“NYCHRL” or “Law”) for an employment agency, employer, employee or agent to advertise a job opening, promotion or transfer opportunity, in NYC, without providing the position’s minimum and maximum annual salary or hourly wage.

Covered Employers and Advertisements

As with other provisions of NYCHRL, “covered employers” are those with at least four employees if one employee is in NYC (or one or more domestic workers), and employment agencies regardless of their size. For purposes of counting employees, employers are required to include full-time and part-time employees, paid interns, domestic workers, owners, family members who are employees, independent contractors working in furtherance of any employer’s business enterprise, and any other category of worker protected by the NYCHRL.

Any written description regarding an available job, promotion, or transfer opportunity that is publicized internally or externally and could be performed, in whole or part, in NYC, either at the employer’s location, at an alternate work location, or at a remote location selected by the employee, must comply with the pay transparency law. Some examples of job advertisements that are covered by the Law are:

• Postings on internal bulletin boards;
• Internet advertisements;
• Printed flyers distributed at job fairs; and
• Newspaper advertisements.

Employers and Advertisements Not Covered

The Law does not apply to temporary positions at a temporary staffing firm (“staffing agency”) as they are already required to provide wage information in compliance with the New York State Wage Theft Prevention Act. A staffing agency is a company who recruits, hires and assigns their staff to other employers to support or supplement their workforce or assist in a special project. While staffing agencies are excluded, covered employers who work with these agencies are not. Employers are not prohibited from hiring, promoting or transferring an employee without using an advertisement. Therefore, the Law does not apply to employers who choose to hire, promote or offer a transfer opportunity without a “written” description.

Disclosure Requirements in Job Advertisements

An employer is required to include the minimum and maximum “annual salary or hourly wage” for jobs, promotions, or transfer opportunities based on the employer’s good faith belief of what the employer would pay a successful job applicant, at the time the job advertisement is posted. Notably, the New York City Commission on Human Rights (“NYCCHR”) does not interpret the “salary” disclosure requirement to include other forms of compensation or benefits such as tips, bonuses, stocks, overtime pay, severance pay, paid time off, health benefits, employer contributions to retirement or savings plans, or value of employer-provided meals or lodging.

Penalties and Fees for Violations

The NYCCHR is authorized to investigate complaints by the public or initiate its own investigation into violations of the Law. In addition, current employees can file a lawsuit against their current employer in court.

Violators could be forced to pay monetary damages to the affected employee and a civil penalty of up to $125,000 (or up to $250,000 upon a finding that employer’s actions were willful, wanton or malicious). However, first time violators can have their civil penalty reduced to $0 if they submit proof, electronically or in person, that the alleged violation was cured within 30 days of service of a complaint by the NYCCHR. The submission of proof of a cure is “deemed an admission of liability for all purposes” including for use on a subsequent violation to prove willful, wanton or malicious conduct.

In addition, a covered employer who is found to have violated the NYCHRL may be required to amend the offending advertisement, create or update employment policies, conduct trainings, provide notices of rights to covered employee or applicants, and engage in other forms of remedial relief.

Key Differences of NYS and NYC Transparency Laws

New York State’s pay transparency law explicitly provides that it does not supersede or preempt local laws or regulations. New York City employers will need to comply with both NYS and NYC laws. While there are many similarities, NYS’s law differs in that it does not apply to advertisements for independent contractors or interns; requires a job description, if one exists, in the advertisement; and provides no private right of action for current employees against their current employers.

Takeaways and Best Practices

Pay transparency undoubtedly will create challenges for many employers, particularly those employers with a multi-state workforce. Employers should become familiar with the state and local pay transparency laws that apply to the business, as well as consider conducting a pay equity audit to assess any disparity in pay. Finally, employers should be mindful of any recording-keeping requirements and seek the advice of counsel when considering how to communicate any remedial changes to the workforce.

According to the United States Government Accountability Office, in 2021, the U.S. Census Bureau reported that women earned about $0.82 for every dollar men earned (an overall pay gap of 18 cents on the dollar), with White women earning about $0.79, Black women earning about $0.63 and Hispanic women earning about $0.58 for every dollar White men earned.

Corning Glass Works v. Brennan, 417 U.S. 188, 195 (1974).

Exception: Certain employees (e.g.HR) cannot disclose salary information of other employees as it may violate privacy and confidentiality laws.

Colorado requires employers to make reasonable efforts to notify all employees of promotional opportunities.

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