There has been a growing trend of states and localities that have passed pay transparency laws aimed at combating wage discrimination. These laws impose a variety of requirements on employers, ranging from mandatory disclosures of salary ranges to annual reporting requirements. This article provides an overview of pay transparency laws in New York City, California, Washington State, Rhode Island, and Illinois that employers should pay attention to as they look ahead to 2023.
Please note that this article is not intended to provide a comprehensive overview of all state and local pay transparency requirements.
New York City Salary Disclosures on Job Postings
In late 2021, New York City amended its Human Rights Law to require employers with 4 or more employees nationwide, with at least 1 employee working in New York City, to disclose salary ranges on job postings. This requirement went into effect on November 1, 2022.
Pay Disclosures on Job Postings: As of November 1st, covered employers must include the salary range (i.e., base wage or pay) on any internal or external advertisement for a job, promotion, or transfer opportunity that can or will be performed, in whole or part, in New York City (including jobs that can be performed remotely in New York City).
Enforcement & Potential Penalties: Employers may be subject to a penalty of up to $250,000 per violation; however, employers will be given 30 days to cure their 1st violation without incurring a penalty.
Other localities in New York State, including Westchester County and Ithaca, have also adopted their own pay transparency requirements. This June, New York State’s legislature passed a statewide pay transparency law that generally mirrors the New York City requirements, but imposes additional recordkeeping and disclosures for compensation based on commission. The state-wide law is still awaiting signature by the Governor and will go into effect 270 days after being signed.
For more on the New York City salary disclosure requirements, see our prior blogs, “NYC Issues Guidance on the New Salary Disclosure Law” and “New York City Will Require Employers to Provide Salary Ranges in Job Postings”.
California Pay Disclosures & Reporting
This September, California signed into law Senate Bill (SB)1162, which imposes significant pay disclosure requirements on employers. The following requirements take effect on January 1, 2023:
- Pay Disclosures Upon Request: All employers (no matter their size), upon request, must provide an employee or applicant the pay scale for the position in which the employee is currently employed or the position for which the applicant is applying.
- Pay Disclosures on Job Postings: Employers with 15 or more employees must include the pay scale (i.e., salary or hourly wage range that the employer reasonably expects to pay for the position) for any job posting, including those posted or published by third parties.
- Recordkeeping: All employers must maintain records of job title and wage rate history for each employee while they are employed and for 3 years after the end of employment. These records must be made available for inspection by the Labor Commissioner.
- Reporting: Currently, employers with 100 or more employees and at least 1 California-based employee must submit certain pay and hours-worked data to the California Department of Fair Employment and Housing. The recently passed SB 1162 amends and expands these reporting requirements by (1) requiring covered employers to submit additional data (median and mean hourly rate broken down by race, ethnicity, and sex); (2) requiring employers that hired 100 or more employees through labor contractors to file a separate pay data report on those individuals; and (3) changing the reporting deadline from March 31st to the 2nd Wednesday of May, among other changes.
Enforcement & Potential Penalties: Employers who fail to comply with the pay disclosure requirements may be subject to a civil penalty of up to $10,000 per violation; however, employers are given the opportunity to cure their 1st violation without incurring a penalty. Aggrieved individuals can also bring a private cause of action.
Employers who fail to submit pay data reporting may be subject to a penalty of $100 per employee for the 1st violation and $200 per employee for any subsequent violation.
For more on the new California pay disclosure and reporting requirements, see our prior article, “Roundup of New California Employment Legislation“. Employers should keep an eye out for additional guidance from the California Department of Labor Standards.
Washington State Salary & Benefit Disclosures on Job Postings
In June 2022, Washington state amended its Equal Pay and Opportunities Act to require employers with 15 or more employees to include pay disclosures on job postings beginning January 1, 2023. In recently released guidance, the Washington Labor & Industries Employment Standards Division (L&I Division) clarified that the disclosure requirement applies to employers engaged in business in Washington with 15 or more employees worldwide, with at least 1 employee working in Washington.
- Pay Disclosures on Job Postings: Beginning January 1, 2023, covered employers must disclose the wage scale or salary range and a general description of all the benefits and other compensation offered on job postings. This applies to all solicitations intended to recruit applicants by the employer or through a third party. For additional details on the information required in the postings, please refer to the L&I Division guidance.
- Pay Disclosures on Internal Transfers & Promotions: The 2022 amendment does not change the existing disclosure requirement for internal job postings, which requires employers to disclose the wage or salary range upon the request of an employee who is offered an internal transfer or promotion.
Enforcement & Potential Penalties: For violations of the disclosure requirements, job applicants and employees may bring a lawsuit and may be entitled to damages, interest, and attorney’s fees. Additionally, employers may be liable for civil penalties of up to $500 for the 1st violation and up to the greater of $1,000 or 10% of damages for a repeat violation.
Rhode Island Equal Pay Act Amendments
This June, Rhode Island expanded its Equal Pay Act to require employers with 1 or more employee in Rhode Island to disclose wage ranges for positions and display a notice at job sites, among other requirements. The following requirements take effect on January 1, 2023:
- Pay Disclosures: Covered employers must disclose wage ranges (1) upon an applicant’s request and prior to any discussion of compensation; (2) to an employee at the time of hire and when the employee moves into a new position; and (3) upon an employee’s request, the wage range for the employee’s position.
- Additional Requirements: The expansion of the Equal Pay Act also prohibits employers from:
- Paying an employee with a protected characteristic less than an employee without such characteristic (i.e., race, color, religion, sex, sexual orientation, gender identity or expression, disability, age, or country of ancestral origin) except where an employer can demonstrate a wage differential is based on one or more specified factors;
- Inquiring about an applicants’ wage history; and
- Retaliating against employees for disclosing or discussing wages.
- Notice Requirement: Covered employers are required to display, in a conspicuous place at work locations, an Equal Pay Act notice developed by the Rhode Island Department of Labor & Training (DLT), once available.
Enforcement & Potential Penalties: The DLT has the power to investigate, inspect, subpoena, and enforce any violations of the Equal Pay Act. Beginning January 1, 2024, employers may be subject to civil pentiles of up to $5,000 per violation.
Further, aggrieved applicants, employees, and former employees can file complaints with the DTL or file a civil suit against an employer within 2 years of when they knew, or should have known, of the violation (this is extended to 3 years when there is a “willful and wanton violation”).
From January 1, 2023 through June 30, 2026, employers can obtain an “affirmative defense” from lawsuits that allege violations of the Equal Pay Act if they voluntarily conduct a good-faith self-evaluation of their pay practices and eliminate any wage disparities discovered within 90 days of completing the evaluation. The affirmative defense is valid for 2 years after such a self-evaluation.
Illinois Equal Pay Registration Certificate
In 2003, Illinois passed the Equal Pay Act, which prohibits employers paying an employee lower wages than an employee of the opposite sex for substantially similar work for jobs that require substantially similar skill, effort, responsibility, under similar working conditions in the same county. In 2019, the Equal Pay Act was expanded to prohibit pay disparities between African American and non-African American employees, as well.
Most recently, in 2021, Illinois passed PA 101-656 and PA 102-36, which again amended the Equal Pay Act to require certain employers to submit certain demographic and wage data to the Illinois Department of Labor (IDOL) and obtain a Equal Pay Registration Certification (EPRC).
Equal Pay Registration Certificate: Employers who have 100 or more employees in Illinois and are required to file federal EEO-1 reporting must apply with the IDOL to obtain an EPRC.
Covered employers must submit an initial EPRC application between March 24, 2022 and March 23, 2024. The IDOL assigns employers an application due date within this timeframe and will notify employers of their due date at least 120 days before their application deadline.
To obtain an EPRC, employers must submit a $150 filing fee with the following information:
- A copy of their most recently filed federal EEO-1 report;
- Demographic and wage data of all employees during the 12-month calendar year immediately prior to the application or recertification, separated by the gender, race, and ethnicity categories, as reported in the most recently filed EEO-1 report; and
- An Equal Pay Compliance Statement that certifies, among other things, the average compensation for its female and minority employees is not consistently below the average compensation for its male and non-minority employees. A Equal Pay Compliance Statement template is available here.
Enforcement & Potential Penalties: The IDOL can review the data submitted in the EPRC application to identify pay disparities and can share this information with the Illinois Department of Human Rights and the Office of the Illinois Attorney General, which are both tasked with enforcing employment discrimination laws. Further, employees can request certain anonymized data from the IDOL for their employer as it relates to their classification and pay.
Businesses who fail to file an EPRC application, as required, may be subject to a fine of up to $10,000. IDOL provides notice to businesses that fail to submit an initial application or recertification and provides 30 days for businesses to do so without incurring a penalty.
Employer Considerations & Action Items
Employers who currently have employees, plan to hire employees, or plan to hire remote positions that can be performed in New York City, California, Rhode Island, Washington State, or Illinois should prepare to comply with pay transparency requirements now, if they have not already begun to do so. Those who fail to comply with these requirements may be subject to substantial civil penalties and potential lawsuits from employees and job applicants.
Before disclosing pay ranges, companies may want to evaluate how they currently determine employee pay (also known as a compensation philosophy), develop a philosophy if one does not currently exist, and adjust employee pay to close any unjustified wage disparities. This will prepare employers when determining the appropriate pay ranges for job postings, responding to employee and applicant requests for pay disclosures, help explain potential pay differences to employees who may compare their pay to ranges displayed on public job postings, and mitigate against potential lawsuits and investigations by state agencies for violations of equal pay laws.
It is anticipated that more states and localities will continue to pass pay transparency laws, which will likely be modeled on existing state and local requirements. As such, it is important for employers to have a plan on how they will comply that is aligned with their overall compensation philosophy.
Sequoia’s Total Rewards Advisory team can help employers develop a compensation philosophy and recommend best practices for addressing new pay transparency laws. Interested employers can reach out to our team here.
New York City Salary Transparency on Job Advertisements
- Sequoia Forewords: “NYC Issues Guidance on the New Salary Disclosure Law” and “New York City Will Require Employers to Provide Salary Ranges in Job Postings”
- NYC Commission on Human Rights Guidance on Salary Transparency in Job Advertisements
California Pay Disclosures & Reporting
- Sequoia Foreword: “Roundup of New California Employment Legislation”
- Senate Bill 1162
Washington State Equal Pay and Opportunities Act
- 2022 Amendment to Equal Pay and Opportunities Act (SB 5761)
- Washington Department of Labor & Industries Equal Pay and Opportunities Act Webpage
- Washington Department of Labor & Industries Guidance
Rhode Island Pay Equity Act
- Rhode Island Department of Labor & Training Pay Equity Act Webpage
- Self-evaluation guidance and a spreadsheet
Illinois Equal Pay Act
- 2021 Amendments to the Equal Pay Act (PA 101-656 and PA 102-36)
- Equal Pay Registration Certificate FAQs
The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog. © 2022 Sequoia Consulting Group. All Rights Reserved.