How to Ensure Your Pay Practices Are in Compliance With Pay Disclosure Laws

A handful of states and localities have passed laws requiring full pay disclosure in job descriptions and other public employment-related postings. The goal is to end race- and gender-based wage disparities and make pay disclosure standard practice.

Pay disclosure mandates will likely gain traction in more jurisdictions, which means employers must be ready to change their compensation policies and even their recruitment practices, if necessary.

One thing is certain: The days of keeping mum about how much you pay your current employees and potential hires are ending.

Pay disclosure mandates spell the end of pay secrecy

No one in “polite society” used to talk openly about pay. Employers didn’t divulge employees’ earnings and discouraged any discussions about pay in the workplace.

Employees also kept their own wages a secret, in part, out of the need for privacy. They may have wondered what their colleagues were earning but didn’t dare ask.

Today, keeping silent about what workers are paid is no longer acceptable. Employers who insist on preventing employees from discussing pay at work are violating the National Labor Relations Act (NLRA). The law safeguards workers’ right to discuss their employer’s pay rates. Discussion is, in fact, disclosure.

The call for pay transparency has been increasing

As workers and employee advocates, many from tech companies and startups, discovered wage disparities based on race and gender, the push for pay transparency skyrocketed.

Google employees ignited a firestorm in 2017 when they started posting their wages online. This bold move upended the ongoing practice of keeping employees’ earnings hidden.

More employees want better transparency in pay. In a study by software maker Visier, 79% of employees favor some type of pay transparency.

In a study by software maker Visier, 79% of employees favor some type of pay transparency.

Stark wage differences between groups of workers fueled the call for transparency. But pay gaps by some accounts are widening. According to Hired’s 2020 4th annual State of Wage Inequality in the Workplace report, men were offered bigger salaries than women for the same job title 63% of the time. In 2019, the number was 60%.

Also, a recent Payscale study found that women earn just 82 cents for every dollar White men earn. And the gap widens for women of color. Black women earn 79 cents, Hispanic women 78 cents, and Native American women 71 cents on the dollar earned by White men.

Pay-talk protection and employers’ responsibilities

The NLRA is straightforward about workers’ rights and employers and unions’ responsibilities when working situations and conditions are involved.  The law states:

“Employees covered by the NLRA are guaranteed the right to form, join, decertify, or assist a labor organization, and to bargain collectively through representatives of their own choosing, or to refrain from such activities. Employees may also join together to improve terms and conditions of employment without a union.”

The law also “protects the rights of employees to act together to address conditions at work, with or without a union. This protection extends to certain work-related conversations conducted on social media, such as Facebook and Twitter.”

As for employers’ and unions’ responsibilities, the law “forbids employers from interfering with employees in the exercise of rights to form, join or assist a labor organization for collective bargaining, or from working together to improve terms and conditions of employment, or refraining from any such activity. Similarly, labor organizations may not interfere with employees in the exercise of these rights.”

The NLRA has been protecting workers’ rights since 1935. But pay secrecy’s demise is clearing the way for pay disclosure.

More government intervention

Federal, state, and local governments have been working to end wage disparities and support pay disclosure in the process.

Former President Barack Obama is responsible for 2 executive orders: 1 supports “equal pay for equal work” and more pay transparency, and the 2nd requires federal contractors to provide compensation data to the U.S. Department of Labor (DOL) so the agency can identify pay disparities. His executive order also protects whistleblowers from retaliation for pay disclosure.

Twenty-eight states, the District of Columbia, and the commonwealth of Puerto Rico have salary history bans to prevent employers from asking job applicants about their pay history. Questions about compensation histories have allowed employers to base pay on an applicant’s previous earnings, a practice that largely discriminates against women because they typically earn less than men.

Which states and municipalities have pay disclosure mandates?

States and municipalities have updated their equal pay laws requiring employers to include pay rate disclosures for open positions. To date they include California; Cincinnati, OH; Colorado; Connecticut; Illinois; Maryland; Massachusetts; Nevada; New York City; Rhode Island; Toledo, OH; Washington; and Westchester County, NY.

Mandates differ among cities and states, but provisions generally require employers, and in some cases, labor organizations and employment agencies, to:

• Provide minimum and maximum pay disclosures (in some cases, only after a job offer and by request)
• Provide benefits descriptions
• Comply with pay history bans
• Include employees who are promoted or transferring internally

Most of the current mandates affect employers with at least 15 employees, but Illinois’ law applies to employers with more than 100 employees, and Westchester County’s law requires at least 4.

Noncompliance could mean costly fees for employers. Those in Nevada could pay up to $5,000 in fines.

Avoiding the law could trigger lawsuits from employees who discover they’ve been paid less than a coworker with the same qualifications, experience, education, and tenure.

What are workers’ reactions to pay disclosures?

ResumeBuilder.com polled 1,200 U.S. employees in November to find out their views on pay disclosure laws. Poll results showed that just 4% would quit their job if they discovered that coworkers in the same position earned more money.

The results also showed that:

• 88% of those polled would demand to know the salary range for their current position, if the law allowed.
• 68% would demand to be paid the highest rate on the salary range.
• 1 in 20 would quit if they found out that a coworker earned more, while 63% would demand the same pay rate.
• 85% would be more likely to apply for a job with a transparent salary range.
• 63% worried about salary transparency causing problems among coworkers.
• 92% said they support pay disclosure laws.
• 61% believe these laws will help close pay gaps.

The fallout from pay disclosure laws could be steep, so, you’ll need to get ready if and when one comes your way.

How to get your pay practices in compliance

If you’ve been working on making sure your employees are paid fairly, complying with a new disclosure law shouldn’t be hard. If pay equity hasn’t been a priority, you can start getting ready by:

• Reviewing your compensation practices for disparities.
• Having managers review and report on how they made their compensation decisions, including pay raises, bonuses, and commissions.
• Collecting data from compensation reports on pay rates in your geographic area.
• Taking steps to close race- and gender-based pay inequities.
• Consulting with legal counsel to make sure you understand the local mandate and to ensure your compliance.

To make sure the transition under a new disclosure law goes smoothly for you and your employees:

• Answer any pay questions from employees without getting defensive.
• Don’t avoid difficult questions from workers but promise to provide any answers you currently don’t have.
• Talk with workers about pay at a suitable time and place.
• Be honest with employees about how pay decisions are made.

Taking these steps will help you to ensure compliance with new pay disclosure laws — and will be in the best interests of your company and employees.