2023: The Year Pay Transparency Becomes a Much Bigger Deal

By John Lomax, Brian Mills, Kevin Brown, Caitlin White, and Delilah Cassidy

The continuing trend of state and local government regulating more aspects of the employment relationship continues, and this time the focus is on pay transparency. These new laws require employers to disclose the pay they offer in job postings.  Colorado was first on the scene in 2021.  Since then, California and Washington have adopted new laws that take effect on January 1, 2023.  And New York City recently adopted a law that took effect on November 1, 2022. The goal of this legislation is to provide more information to applicants about the expected pay ranges, and hopefully, to eliminate unequal treatment as applicants pursue employment opportunities. The new laws are generating questions, and even where answered, the laws differ by jurisdiction.

This alert briefly addresses the scope of the four recent laws, but each law is different, and some laws include components that are much broader than pay transparency. For example, California will require certain employers to file annual pay data reports each year focused on the rates of pay by race, ethnicity, and sex similar to the EEOC’s attempt to expand EEO-1 reports in 2016, which was never implemented.¹

California

California’s pay transparency law will go into effect on January 1, 2023.² 

• Salary transparency in external job postings.  Employers with 15 or more employees will be required to include a pay scale, either the salary or hourly wage range, for any external job postings for non-employee applicants, including postings published by third parties.  Other forms of compensation are not required to be disclosed.
• Salary transparency recordkeeping.  Employers are required to maintain a record of job titles and wage history during each employee’s employment and for three years after termination.
• Pay data reports.  Private employers with over 100 employees will be required to file an annual pay data report with the California Civil Rights Department by the second Wednesday in May. The first report will be due on May 23, 2023 for the 2022 year.  Although previously employers could submit an EEO-1 in lieu of a pay data report, the new law mandates the submission of a pay data report for all employers that have over 100 employees. The pay data reports should highlight (1) the number of employees by race, ethnicity, and sex for 10 specified job categories, similar to the EEO-1 categories; (2) the number of employees by race, ethnicity, and sex, whose annual earnings fall within U.S. Bureau of Labor Statistics pay bands; (3) the mean and mean hourly rates for each combination of race, ethnicity, and sex for the specified job categories; and (4) summaries of earnings for all employees in each job category by race, ethnicity, and sex during a chosen pay period and for the entire reporting year. The same pay data report must be completed for private employers who have over 100 total employees hired through labor contractors. If an employer has several establishments, a pay report must be submitted for each establishment.

Washington

Washington’s pay transparency law will go into effect on January 1, 2023.³ Employers who engage in any business, industry, profession, or activity in the state of Washington must comply.

• Salary transparency in external job postings.  Employers with 15 or more employees will be required to include a wage scale or salary range for any job posting and a general description of all benefits and other forms of compensation to be offered to hired applicants. This applies to postings published by third parties, postings done electronically, and postings done by hard copies.
• Salary transparency for transfers and promotions.  Upon request, employers must provide the wage scale or salary range for the current employee’s new position when internally transferred or promoted.

New York City

New York City’s pay transparency law went into effect on November 1, 2022.⁴  The law does not apply to jobs that cannot or will not be performed, at least in part, in New York City.

• Salary transparency in external job postings.  The New York City law requires employers with four or more employees to include minimum and maximum salary or hourly wage ranges on most job postings, including external job postings published or promoted by third parties. Other forms of compensation are not required to be disclosed.
• Salary transparency for transfers and promotions.  Employers with four or more employees must include minimum and maximum salary or hourly wage ranges for advertised jobs, promotions, or transfer opportunities to current employees, including external job postings published or promoted by third parties.

Colorado

Colorado’s pay transparency law, the Equal Pay for Equal Work Act (“EPEW”), went into effect on January 1, 2021.⁵  EPEW applies to any job to be performed in Colorado and has also been interpreted to apply to remote workers who may reasonably perform work in Colorado, even if the posting indicates that Colorado employees need not apply.

• Salary transparency in external job postings. EPEW requires all employers to include the following in each job posting: the hourly or salary compensation, or a range for the compensation; a general description of all bonuses or other forms of compensation; and a general description of employment benefits being offered for the position.
• Salary transparency for transfers and promotions.  Employers must reasonably announce, post, or make known all opportunities for promotion to current employees, even if no current employee is qualified for the position.
• Salary transparency in hiring.  Employers are prohibited from asking about applicant salary history or relying on salary history in employment or salary decisions.
• Salary transparency recordkeeping.  Employers are required to maintain a record of job titles and wage history during each employee’s employment and for two years after termination.

Although ensuring compliance with pay transparency laws may cause initial headaches for employers and HR departments, experts say that these laws will help streamline hiring processes and result in fewer cases of candidates declining positions after learning the offered salary. Additionally, job postings are more likely to be viewed if a salary range is included. As new laws take effect, it is important for multi-state employers to remain vigilant and ensure that all job postings, even those published by third parties, comply with various state laws concerning salary transparency.