Employers Should Prepare for Expanded Pay Transparency Requirements in 2023
Employers in several states will have to comply with new pay transparency requirements in 2023, as expanded requirements become enforceable in California and Washington, and new legislation takes effect in Rhode Island and New York.
Existing Pay Transparency Law
California’s pay transparency law, which became effective in 2018, required employers to provide the pay scale for a position to an applicant “upon reasonable request,” made after the applicant completed an initial interview with the employer.
New Job Posting and Record Keeping Requirements
California’s new pay transparency law, effective Jan. 1, 2023, significantly expands these obligations, requiring employers with at least one California employee and 15 or more employees total to include the pay scale for a position in any job posting, and requiring all employers to provide current employees the pay scale for their current position upon request. Notably, employers with 15 or more employees that engage a third party to publish job postings must provide the pay scale to the third party, which must include the pay scale in the job posting. The new law also requires employers to maintain records of job titles and wage range histories for each employee for three years after the end of employment, imposing a rebuttable presumption in favor of an employee’s claim if an employer fails to keep such records. An employer found in violation of the new law may be subject to civil penalties between $100 and $10,000 per violation.
New Reporting Requirements
California has also expanded its pay reporting requirements as of Jan. 1. Where private employers with 100 or more employees were previously required to submit pay data reports including the number of employees by race, ethnicity and sex in specified job categories, the new law will also require such reports to include the median and mean hourly rate for each combination of race, ethnicity and sex within each job category. Further, employers may no longer submit an Employer Information Report (EEO-1) in lieu of the pay data report.
Existing Pay Transparency Law
Washington’s pay transparency law, which became effective in 2019, required employers to provide the minimum wage or salary for the position upon request, to an applicant after the employer initially offered the applicant the position, and to an employee offered an internal transfer or promotion to a new position.
New Job Posting Requirements
Washington’s new pay transparency legislation, effective Jan. 1, 2023, significantly expands these obligations by requiring employers to disclose in each job posting not only the wage scale or salary range, but also a general description of all the benefits and other compensation of the position. If the employer does not already have an existing wage scale or salary range for a position, a scale or range should be created prior to publishing the posting. Also, if the information changes after posting, it should be updated. Of note, the state’s newly issued guidance takes a sweeping view of the requirement to provide a “general description of all benefits”: this must include references to health care, other insurance, retirement, any benefits permitting paid days off (including more generous paid sick leave accruals, parental leave, holidays, and paid time off or vacation benefits), and any other benefits that must be reported for federal tax purposes. Moreover, the listing of insurance and retirement benefits must include the types (e.g., medical, dental, vision, 401K, basic life, etc.), and the listing of paid days off must include the amount (e.g., 15 days of accrued vacation per year or eight hours of accrued sick leave per month). “Other compensation” includes, but is not limited to, bonuses, commissions, profit-sharing and stock options.
Washington’s pay transparency law has expansive reach, as according to the new guidance, it applies to employers with 15 or more employees “engaging in any business, industry, profession, or activity in Washington,” which includes employers that do not have a physical presence in Washington if the employer has one or more Washington-based employees, engages in business in Washington, or recruits for jobs that could be filled by a Washington-based employee. Notably, employers must make the required pay transparency disclosures on postings for remote work that could be performed by a Washington-based employee, and an employer cannot avoid the disclosure requirements by indicating within a posting that it will not accept Washington applicants.
An employer found in violation of the new law may be subject to civil penalties of $500 to $1,000 per violation (or 10% of the damages, whichever is greater). The law also provides for a private right of action, through which an employer may be ordered to pay the complainant actual damages; statutory damages equal to the actual damages or $5,000, whichever is greater; interest; and reasonable attorneys’ fees and costs.
New Pay Transparency Law
Effective Jan. 1, 2023, Rhode Island employers must provide an applicant the wage range for the position for which the applicant is applying upon the applicant’s request. Employers “should” provide the wage range for a position to an applicant “prior to discussing compensation.” With respect to current employees, employers must provide an employee the wage range for the employee’s position at the time of hire and when the employee moves into a new position, as well as upon an employee’s request during the course of employment.
“Wage range” means the wage range that the employer anticipates relying on in setting wages for the position and may include reference to any applicable pay scale, previously determined range of wages for the position, the actual range of wages for those currently holding equivalent positions, or the budgeted amount for the position.
An employer found in violation of the new law may be subject to civil penalties of $1,000 to $5,000 per violation. The law also provides for a private right of action, through which an employer may be ordered to pay the complainant compensatory damages, or special damages not to exceed $10,000, and reasonable attorneys’ fees and costs.
New Job Posting and Record Keeping Requirements
New York’s new pay transparency law will go into effect Sept. 17, 2023, and requires an employer, or agent of an employer, to list a salary range for all advertised jobs, promotions and transfer opportunities, and to include a job description, if such description exists. The law also requires an employer to maintain “necessary records” including, but not limited to, the history of compensation ranges for each job, promotion or transfer opportunity, and the job descriptions for such positions. This law applies to jobs that can be performed, at least in part, in the state of New York, and to employers of four or more employees.
Note that the state law is in addition to the New York City pay transparency law which took effect on Nov. 1, 2022, as well as the pay transparency laws in Westchester County and Ithaca, which also took effect in 2022. The New York State Department of Labor will issue regulations pertaining to the new law, which should provide additional guidance on the details of the new requirements.
Next Steps for Employers
Employers should carefully consider these changes in the law and take immediate steps to ensure that job postings are consistent with the above requirements. If you have any questions specific to your organization, please contact your regular Armstrong Teasdale lawyer or one of the authors listed below.