By: Bill Osterndorf
Pay transparency has been a major subject of interest for the states in the last few years. While there is no federal law regarding pay transparency that affects all organizations, there are many different laws that various states have implemented. There are additional states that will have pay transparency laws in effect during 2025.
What is “Pay Transparency”?
There are two types of pay transparency laws. Some laws prevent employers from taking action against applicants or employees who discuss pay with each other. This prohibition exists for federal contractors and has also been implemented by some states. This type of pay transparency law can dovetail with other regulatory edicts prohibiting expressions of speech by applicants and employees.
There are also laws that require employers to provide pay information to applicants and/or employees under certain circumstances. There have been a proliferation of these types of laws in the last few years. Pay transparency laws of this type that have been adopted by the states may differ greatly. The common thread is that this type of pay transparency law requires employers to reveal pay information that in the past may have been closely guarded.
Why Are Pay Transparency Laws Important?
As with many situations where there is a patchwork of regulatory requirements, it is easy to assume that pay transparency laws have a limited effect on employers. However, the growing number of pay transparency laws and the growing complexity associated with these laws are causing problems for employers. The potential sanctions associated with these laws may become burdensome for employers, especially when employers have employees located in multiple states.
States typically establish fines for failure to meet pay transparency requirements. While a first violation of a pay transparency law may simply result in a notice to do better next time, subsequent violations may result in fines ranging from $10,000 to $25,000. One state, the State of Washington, allows individuals to file actions for pay transparency violations rather than having the state handle the violation. This has led to multiple lawsuits and at least one multi-million dollar settlement.
In addition to the compliance considerations, many applicants and employees have expectations of a culture that includes pay transparency. Studies have shown there is a competitive advantage to such a culture. Some of the positive outcomes of such a culture include increased trust, increased employee engagement, and reduced turnover. In addition, several studies have shown that the quality and quantity of applicant pools improve when salary ranges are listed on job postings.
Which States Have Pay Transparency Laws?
DCI has an interactive map that shows states with current or pending pay transparency laws. States with pay transparency laws in effect as of the end of 2024 include:
- California
- Colorado
- Connecticut
- Hawaii
- Maryland
- Nevada
- New York
- Rhode Island
- Washington
There are also a number of cities that currently have pay transparency laws. These include Jersey City, New Jersey; New York City; Cincinnati, Ohio; and Washington, D.C.
States with pay transparency laws that will become effective in 2025 include:
- Illinois (effective January 1, 2025)
- Massachusetts (effective July 31, 2025)
- Minnesota (effective January 1, 2025)
- New Jersey (appears to take effect June 1, 2025)
- Vermont (effective July 1, 2025)
What Kinds of Requirements Are in Pay Transparency Laws?
The provisions in pay transparency laws that focus on providing information to applicants or employees vary greatly from state to state. Pay transparency laws may include the following requirements:
- Listing specific pay ranges in all job postings
- Listing information about other forms of compensation in job postings
- Listing information about benefits in job postings
- Providing pay information to applicants upon request
- Providing employees with pay ranges for their job classifications
- Providing employees with pay ranges when employees express interest in new positions
There is no uniform manner in which pay rates or ranges, benefits information, and other forms of compensation must be provided to applicants and employees. Hawaii’s pay transparency law only requires that employers simply provide a salary range or hourly rate in job postings. Colorado’s pay transparency law requires that employers provide summary information on benefits in a job posting, while Illinois’ pay transparency law will require employers to list benefit information or provide a link to this information in a job posting.
Which Employers and Positions Are Covered By Pay Transparency Laws?
As with many of the provisions associated with pay transparency laws, the employers and positions covered by pay transparency laws vary greatly from state to state. Some pay transparency laws apply solely to an employer’s positions located in the relevant state; other laws apply to positions where individuals from that state may apply for an opening or where the position in question reports to the relevant state.
The size of employers covered by pay transparency laws include the following examples:
- The Colorado law applies if an employer has one or more employees in Colorado
- The Massachusetts law applies to employers with 25 or more employees in Massachusetts
- The Hawaii law applies to employers with 50 or more employees
Some states such as Illinois provide very specific instructions on positions covered by the state’s pay transparency law. Other states such as Colorado have much less defined instructions on which positions are covered.
What Should Employers Do In Regard to Pay Transparency Laws?
There is no simple way to comply with the myriad of pay transparency laws that are in effect. This situation will become even more challenging as additional state laws become effective in 2025 and other states consider adopting pay transparency laws. However, there are some important actions employers can take to mitigate the risks associated with pay transparency laws:
- Know which laws apply to your organization. If your organization has operations or employees in one of the states listed above, read the relevant laws and their implemented regulations to understand what is required.
- Include a salary range or wage rate in all job postings. There may be situations where no pay transparency law applies to your organization. However, listing a salary range or wage rate in all job postings is a partial solution to those situations where a pay transparency law may apply.
- Be prepared to provide employees with information on salary ranges or wage rates. Pay transparency laws often require that pay information be provided to employees on request or when a position opens, and an employee expresses interest. Your organization should be ready to provide information on whatever salary range or wage rates are associated with current positions.
- Establish salary ranges and wage rates for all positions. Having an effective compensation system that includes defined salary ranges and wage rates will make it easier to meet pay transparency laws. Just as importantly, it will provide insight into situations where there may be internal pay equity issues.
DCI offers services that may be valuable to your organization in meeting pay transparency requirements, like providing internal pay equity studies to determine if there are any disparities involving current employees and providing consulting support on compensation systems. This compensation consulting can include the development of salary ranges and wage rates that are competitive in the marketplace and that meet pay transparency laws. Our compensation consulting team can also provide support on meeting the myriad laws that affect compensation. For more information on these compensation consulting services, visit our website.
The DCI Blog will continue to monitor the ever-changing landscape of pay transparency laws and will provide updates as they occur.
