Pay transparency laws are spreading across the country. What should an employer do?

Pay transparency laws that require the disclosure of expected compensation for vacant positions (and sometimes for current positions) are increasingly being adopted by states and local jurisdictions. The New York City law goes into effect Nov. 1, and a New York State pay transparency bill awaits her signature on Governor Kathy Hochul’s desk. These laws will have a significant impact on both employers’ recruitment strategies and employee retention.

New York City salary disclosure law goes into effect November 1

Pay transparency in New York right comes into force on November 1. Like us previously described, the law requires covered employers who post a job, promotion, or transfer opportunity for a position that can or will be filled in New York City to include a salary range for the position. The minimum and maximum wages or hourly wages for an advertised position must represent the range that the employer believes in good faith at the time it will pay for that position. If the compensation is fixed, the posting is allowed to say, for example, “$20 per hour” or “$50,000 per year”, rather than a range. Under 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, 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 (whether from an office, in the field, or remotely from an employee’s New York residence). The law also covers placement agencies. However, temporary help companies, such as employment agencies, are exempt from wage disclosure requirements.

The law only applies to positions that must or can be filled, even in part, in New York. Accordingly, postings by a covered employer for remote positions that could, in theory, be done in New York must comply with the law.

The law can be enforced through civil suits, complaints to the Commission on Human Rights and the Office of Law Enforcement, but, following an amendment to the law, suits alleging Violations can only be brought by current employees – candidates cannot bring a case against a potential employer for allegedly failing to include a salary scale in an advertisement for a vacancy. And individuals cannot sue former employers.

For first violations, employers and placement agencies alleged to have violated the law will have 30 days from the date of receipt of notice of the alleged violation to show the Commission that they have remedied the violation. by altering the posting, and those who do so will avoid any monetary penalty. However, by submitting proof of recovery, an employer is admitting liability, so any subsequent violations 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 wage disclosure law, effective November 1:

• Review existing covered job postings;
• determine in good faith the target salary range of positions to be posted or advertised; and
• bring any existing or planned display into conformity.

New York State Salary Disclosure Law, once signed, expected to go into effect in 2023

A similar Pay Transparency Act was passed by the New York State Legislature in June 2022 and is now before Governor Hochul for consideration. The state law, if enacted, would amend New York’s labor law to include a new section, Article 194-b, requiring private employers with four or more employees to disclose the minimum and maximum hourly wages that a covered employer believes in good faith that they 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 commission-based. Governor Hochul is expected to sign the bill, which would take effect 270 days after it is signed into law.

If enacted, New York State law will add three requirements to New York City employers’ obligations under city law: (i) a posting must include a job description if it there is one; (ii) a posting must include a general statement that compensation is commission-based, if applicable to that position; and (iii) employers must retain and maintain records of compensation history for job postings, promotions and transfer opportunities.

The bill provides that it will not supersede or preempt any local law. This means that employers covered by state and city laws would be required to comply with both. Business advocacy groups have urged Governor Hochul to refuse to sign the bill without changes. Specifically, the New York State Business Council advocated that the bill be amended so that it preempts local wage disclosure ordinances (other than New York City law), in the goal of preventing inconsistent wage disclosure laws across the state. The Partnership for the City of New York urges Governor Hochul to clarify that New York businesses are not required to include salary ranges in remote job postings that may be made outside of New State York. Any changes Governor Hochul makes to the bill will need to be approved by the state legislature in its next session.

Persons alleging they have been affected by a violation of state law, including applicants, may file a complaint with the state commissioner of labor. A first violation of state law would subject an employer to a civil penalty of $1,000 (a waiver of city law, which allows employers to avoid a monetary penalty for a first violation if they correct it within 30 days of receiving the notice of violation), $2,000 for a second offense and $3,000 for a third or any subsequent offense. State law would also prohibit employers from retaliating against people who exercise their rights under the law.

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

The expansion of salary disclosure requirements in jurisdictions outside of New York

Pay transparency requirements, aimed at greater gender and racial pay equity, are currently in effect in several states and cities, with more to come. California, Colorado, Connecticut, Maryland, Nevada, Rhode Island and Washington as well as parts of New York (Ithaca, New York and Westchester County), New Jersey (Jersey City) and Ohio (Cincinnati and Toledo) have passed laws that require employers to provide pay scales to applicants and employees. These laws take several different approaches:

• Some, including those in New York City, New York State, and California, require disclosure in any job posting or advertisement;
• some, including those in California, Connecticut, and Maryland, require disclosure to applicants upon request;
• and some, including those in Colorado and 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 Salary Disclosure Act, which goes into effect January 1, 2023. It requires employers with 15 or more employees to disclose the range of hourly or annual wages that the employer reasonably expects to pay for the position in any job posting and to report annual salary data for employees hired through contractors to the State. In addition, California employers are already required to disclose the salary range for a vacant position to an applicant who requests it, and the new law will also require employers to (i) provide the salary range for the current position of an existing employee on a reasonable basis requests and (ii) maintain records of the job title and salary rate history for each employee for the duration of their employment plus three years.

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

Conclusion

Employers should take note of the pay transparency requirements currently in place in various jurisdictions and develop plans to identify pay ranges for vacant positions and ensure compliance with applicable laws. We will continue to monitor and report on developments regarding pay transparency laws that come into 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.