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Salary Transparency on HR Radar Following New NYC, CA Laws  

New laws from New York City and California are heightening attention for employers and human resources teams on pay transparency and promotion of job listings.

arrow 306811 640 smallAt the start of this month, New York City mandated that employers with four or more salaried staff and with at least one of these employees working in the city disclose a “good faith” pay range covering minimum and maximum base salary or hourly pay for all jobs advertised, CNN Business reports. “'Good Faith' means the salary range the employer honestly believes at the time they are listing the job advertisement that they are willing to pay the successful applicant(s),” the New York City Commission on Human Rights notes.

“Employers must include both a minimum and a maximum salary; the range cannot be open ended,” according to the Commission. “For example, '$15 per hour and up' or ‘maximum $50,000 per year’ would not be consistent with the new requirements.”

The Commission will not hit employers and employment agencies with a civil penalty for an initial complaint of an alleged violation as long as they can prove they have rectified the violation within 30 days of notice from the Commission. But “covered employers may have to pay civil penalties of up to $250,000 for a uncured first violation of the new law, as well as for any subsequent violations,” it notes.

As of Jan. 1, 2023, California will make effective a similar law for employers with at least 15 workers to disclose the salary or hourly wage range for what they “‘reasonably expect’ to pay for a job role,” CNN Business reports. While the laws target New York City and California, “thousands of employers” across the nation will be impacted even if they are not based in these two areas if they still conduct business there, says Joy Rosenquist, special counsel at employment law firm Littler Mendelson.

“A lot of gray areas need to be worked out,” Rosenquist says, noting that with the law in California, for example, it is not as clear as it needs to be on how employers should deal with job advertisements for remote roles. A potential source of angst for employers centers on advertising pay information and how that may differ depending on numerous factors, says John Haney, a labor and employment attorney at Holland & Knight. This could include what the labor competition and legal requirements are in certain locations, with some employers opting to advertise numerous pay ranges depending on location.

With the possibility of volatile markets leading to quick changes in pay, “an employer could be in violation of the law if the pay scale was changed after the initial job posting is published,” Emily Dickens, head of government affairs at the Society for Human Resource Management, noted in an August letter to California lawmakers.

In New York City, some employers may choose to avoid the new requirement as that law allows for them not to reveal pay ranges as long as they don’t post advertisements in writing. “A personal outreach, [such as] a phone call or a conversation would not be covered as it is not a written advertisement,” says Carol Goodman, a partner at Herrick, Feinstein.

For job seekers, they won’t have to wait weeks or months during the recruitment process before learning what a potential employer is willing to pay. Current employees will potentially benefit from knowing what advertised jobs are paying, giving them a starting point to discuss their own compensation with their employer.

Larger employers will likely find it easier to have a formalized process in place, whereas it may take some time for smaller- and mid-sized firms to make adjustments to be in compliance, Tony Guadagni, senior principal of research at consulting firm Gartner, tells CNBC of the New York City law. “I think most HR leaders would like to be more transparent about pay, but have a hard time making that case to executives—the benefits you see with positive engagement and employee outcomes outweighs some risks,” Guadagni says.

“HR leaders see this as a silver lining,” he adds. “For the first time, their hand is being forced with regard to pay transparency, and they’re able to get more executive buy-in on things they know to be positive on the organization as a whole.”

Paul Lewis, chief customer officer at Adzuna, a job search engine, writes for Quartz that one-third of job applicants in the U.S. reject an interview when they don’t know the salary range, according to a survey by his firm of 2,000 job seekers. And having jobs unfilled really becomes a cost burden over time, he adds.

“Jobseekers are skeptical of employers who do not disclose salaries in job ads,” Lewis writes. “A third assume the company is hiding something, while 30% believe it shows the company will underpay them. Others think it makes the company look untrustworthy (28%) or indicates that the company will be biased in how they pay their employees (31%).”

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