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State ‘Pay Transparency’ Laws Causing Issues for Employers


In an era in which workers are successfully pushing state legislatures to strengthen employee rights, a number of states have responded by enacting “pay transparency” laws that require employers to disclose information about how they compensate employees either to the public or to employees themselves.

Depending on the state, pay transparency laws may require the employer to provide job applicants the exact salary range for the position at a certain time during the hiring process; to provide the salary range to employees upon request, when changing jobs or when hired; or to provide the salary range in the job posting itself.

As of the start of 2023, pay transparency laws have taken effect in seven states and a handful of municipalities, with laws being considered in several more states.

With this in mind, it would serve employers well to check in with a local employment attorney to review their policies and procedures regarding disclosure of salary information.

That’s because these laws — even if they’re a legitimate way to protect workers from discrimination and exploitation — can create some thorny issues for employers everywhere.

For example, say your state does not have a pay transparency law but you post job openings at sites that may draw applicants from all over the country.

Are you then obligated to comply with pay transparency laws in other states from which candidates may be applying?

While there’s no simple answer to that question, you may be tempted to sidestep the issue by avoiding candidates from states with stringent pay transparency laws in place.

But that comes with its own risks.

For one thing, you may be missing out on the best candidate for the opening.

Additionally, you could suffer bad publicity as a result.

That’s what happened when Colorado passed a pay transparency law.

Employers in other states simply refrained from hiring Colorado residents. In response, disgruntled Coloradans launched a website to bring negative attention to companies that weren’t complying with the Colorado law.

The issue becomes even more stark if the employer posts a job that can be performed remotely.

In that case, even if the laws of the state where the employee lives do not require employers to post exact salary ranges during the hiring process, but they do require disclosure to employees on request, an employer would seemingly be bound by that law even if the employer is located thousands of miles away.

Meanwhile, pay transparency laws could cause employers headaches in even trying to determine how to set compensation in the first place, particularly given the reality of an increasingly remote workforce.

After all, huge disparities in pay scales and costs of living in different parts of the country mean that a job being performed in Boston, New York or San Francisco would normally call for a different salary level than one being performed in, say, suburban Kansas City or rural Minnesota.

The ultimate question is whether an employer should be creating job postings with the most restrictive state laws or the least restrictive state laws in mind.

The answer may be to look for a “sweet spot” that meets the requirements of as many state and local laws as possible.

But this is something you would absolutely want to discuss with an attorney who can look at your company’s unique situation and provide the best advice possible.