"SHOW ME THE MONEY!" - Required Disclosures to Employees and Pay Data Reporting

By Tommy Postek and Kimberly Korando

NEW PAY TRANSPARENCY LAWS POSE NEW REQUIREMENTS FOR JOB POSTINGS, RECRUITING AND WORKPLACE DISCLOSURE AND REPORTING: PART 3 OF 4

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While the recent pay transparency headlines have focused on job postings and recruiting, those already on the job are joining Janet Jackson in asking, “What have you done for me lately?” Some states and localities have obliged by enacting laws giving current employees rights to get an answer and, in some cases, requiring employers to make pay disclosures even when no one is asking. With the disclosures comes the prospect of a response reminiscent of the ever-unimpressed Shania Twain and, in turn, requests for salary reviews and adjustments.

In this third Alert, we discuss pay transparency laws governing position pay range disclosures to current and former employees and pay reporting obligations to government agencies.[1]  As with the job posting and recruiting obligations discussed in our second Alert, the wide span of differing laws among jurisdictions governing disclosures to employees and government agencies is challenging for employers with multi-state operations or employees working remotely from jurisdictions outside of the states where the employer operates. Here is some key information to keep in mind.

Pay Disclosures to Employees

Some states and localities have enacted laws mandating certain pay information disclosures to current and former employees. These laws range from requiring disclosure of pay information relating to the employee’s current position upon their request, to requiring disclosures upon the employee’s hire or transfer or promotion to another position regardless of any request, to requiring disclosures when advertising positions that would constitute transfer or promotional opportunities for current employees. California, Colorado, Connecticut, Maryland, Nevada, New York (including Albany County, City of Ithaca, New York City, Westchester County), Rhode Island and Washington are among the jurisdictions enacting pay disclosure laws regarding current employees. Among the requirements:

• California requires that, upon request, employers provide current employees with the pay scale for their current position. Pay scale means the salary or hourly wage range that the employer reasonably expects to pay for the position.[2]

The California law applies to all employers. 

• Colorado requires written notice/posting (along with title, pay ranges and other forms of compensation, benefits and how to apply) to current Colorado employees of posted positions that could be considered a promotional opportunity and could be performed in Colorado.

All employers with at least one employee residing in Colorado are covered.

• Connecticut requires that employers provide employees with the wage range for their specific position upon their hiring, when they change to a different position and upon their first request for a wage range. Wage range means the range of wages (including commission) the employer anticipates relying on when setting wages for a position, and may include reference to any applicable pay scale, previously determined range of wages for the position, actual range of wages for employees currently holding comparable positions or the budgeted amount for the position.[3] The Connecticut Department of Labor has issued a fact sheet on the requirements that can be accessed here.

The Connecticut law applies to all employers with a physical presence in the state employing at least one employee (even if the employees work out-of-state).

• Nevada requires employers to provide wage or salary ranges for a promotion or transfer to their current employees who have applied for the promotion or transfer, completed an interview for the promotion or transfer, have been offered the promotion or transfer, or requested the wage or salary range or rate of the promotion or transfer position.[4]

The Nevada law applies to all employers.

• New York State law, in effect on September 17, 2023, requires “advertised” job, promotion or transfer opportunities to include the compensation or range of compensation for the job, promotion or transfer opportunity along with the job description if one exists.[5] Range of compensation is defined as the minimum and maximum annual salary or hourly range of compensation that the employer in good faith believes to be accurate. Advertise is defined as making available a written (including electronic) description of the opportunity to potential applicants for internal or public viewing. The disclosure requirement applies to (1) jobs performed in New York and (2) jobs performed outside New York State, but which report to a supervisor, office, or other work site in New York.

The New York State law applies to employers with four or more employees, or persons or entities acting as an employment agent or recruiter or otherwise connecting applicants with employers. Temporary help firms, as defined under state law, are excluded.

• New York City (along with other localities in New York State) requires the same pay transparency in advertisements for promotions or transfer opportunities.

The New York City law applies to employers with four or more workers (or one or more domestic workers), at least one of whom works in New York City, and all employment agencies regardless of size. The employers subject to the other New York State local laws are listed in the footnotes.[6]

• Rhode Island requires employers to provide current employees with wage range information for a position at the time of hire, when they are moved into a new position, and upon request for their current position.[7]

The Rhode Island law applies to employers with at least one employee within the state.

• Washington requires employers, upon request, to provide employees who have been offered a promotion or internal transfer the wage scale or salary range for the offered position. If no wage scale or salary range exists, the minimum wage or salary expectation set by the employer prior to posting the position, making a position transfer or making the promotion must be provided.[8]  The Washington State Department of Labor and Industries has issued an employer’s guide which can be accessed here. 

The Washington law applies to employers with 15 or more employees, at least one of which must be a Washington-based employee. 

• Maryland requires that employers provide applicants the wage range for the position they applied to but does not expressly require that such information be provided to employees. It remains undetermined as to whether or under what circumstances, if any, a current employee will be considered an applicant.

The law does make it unlawful for employers to prohibit employees from asking their employer to provide a “reason why the employee’s wages are a condition of employment.” This provision seems to suggest that employees have the right to request a justification for the wage rate they are being paid. Importantly, while employees have the right to ask, there is no express requirement that the employer provide any requested explanation.[9] 

The Maryland law applies to all employers.

Pay Data Reporting

As the federal government’s actions to require employers to annually report pay data as part the annual EEO-1 Report have stalled, states have begun to enact their own pay data reporting laws designed to identify pay gaps between the sexes, races and ethnicities. These laws have been enacted with the stated purpose of achieving pay equity among these groups. Leading the way, California and Illinois require covered employers to file pay data reports with state designated agencies.

California requires covered employers to annually report pay (mean and median hourly rates), demographic (race, ethnicity, sex) and other workforce data (specified job categories and pay bands) to the California Civil Rights Department (CRD). The report covers only those employees assigned to a California establishment or who work from California. Additional information about the reporting requirements can be accessed here.

Covered employers are private employers of 100 or more employees (located anywhere as long as at least one employee is in California). Special rules apply for labor contractor employees.

Illinois goes further and requires covered employers to report every two years a series of individualized employee information including but not limited to name, race, ethnicity, gender, pay, job title and classification, and hours worked. The reporting requirement is administered through a requirement that the employer enroll with the Illinois Department of Labor and apply for an Equal Pay Registration Certificate (EPRC) which, in turn, requires submission of the employee pay data and a signed equal pay compliance statement.

Current employees are allowed to file a request with the state to obtain anonymized data regarding their job classification or title and the pay for that classification or title. This request is limited to their employer and the county where they work. Additional information about the reporting requirement can be accessed here.

The Illinois law applies to employers with 100 or more employees who during the reporting period either physically worked in the state or worked outside the state but reported to management located in the state.

What Should You Do?

The growing number of jurisdictions requiring position pay disclosures to current employees and pay data reporting to government agencies presents a number of compliance challenges. Here is a list that may be helpful in working through some preliminary issues:

• Know where your business operations, current employees and potential employees are located. State and local jurisdictions will be important to know.

• Check the current and upcoming pay transparency laws in each of these jurisdictions. Determine whether the laws contain any coverage thresholds that would exempt your organization.

• Determine whether your organization will seek to adopt a uniform national approach to pay disclosures or, alternatively, will tailor practices on a jurisdiction-by-jurisdiction basis.

• Revisit your internal policies, procedures and training guidelines to make sure that they are compliant with the applicable laws.
• Begin considering proactive practices to avoid or minimize pay disparities going forward, such as written policies on:
  • Starting pay decisions:
    • Procedural steps that will be followed.
    • Who participates in the decision/has final authority?
    • Factors that will/will not govern the decision.
    • Constraints/limitation on decisions and discretion.
    • Documentation of the rationale/identity of decision-makers.
  • Merit and promotional increases:
    • Factors that will govern increase.
    • Constraints/limitation on decisions and discretion.
    • Documentation of the rationale/identity of decision-makers.
• Requirements for proposed pay increases (merit, promotion, bonus) to be reviewed for potential pay equity issues before final approval, communication and implementation.

• Prepare communications in anticipation of current employee questions about how pay and pay ranges are set and prepare managers on how to handle these questions.

• Be prepared for current employees to request that their salary be reviewed and adjusted in light of disclosed ranges.

Finally, as we have previously noted, pay transparency is an evolving and growing compliance challenge. It will be essential to stay up to date with compliance guidance issued by the authorities in the jurisdictions applicable to your business as well as keep abreast of new laws enacted in other jurisdictions.

In our fourth and final Alert in this series, we will cover Employee Rights to Discuss Pay Information and Laws Against Pay Confidentiality Polices and Agreements. In the meantime, for more information on these topics, please contact Tommy Postek, Kim Korando or the Smith Anderson employment lawyer with whom you regularly work.

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[1] The pay disclosure laws discussed in this Alert relate to disclosures of the wage scale or salary range for particular positions, and not to the federal, state and local laws requiring that employers maintain and provide to employees their individual payroll information for compensation actually received.

[2] CA Labor Code § 432.3

[3] C.G.S. § 31-40z(b)(9)

[4] N.R.S. 613.133 (2)(b)

[5] N.Y. Lab. Law § 194-b

[6] Albany County – Temporary help firms advertising for temporary employees are not covered by the local posting laws; City of Ithaca – Employers, not including temporary help firms seeking temporary employees, with at least four employees (excluding domestic service and parent, spouse or child relations with the employer) whose standard work location is in the city are covered; Westchester County – Employers that post for positions that are required to be performed, in whole or in part, in Westchester County, whether from an office, in the field or remotely, are covered by the local law. Temporary help firms advertising for temporary employees are not covered by the local posting laws.

[7] R.I. Gen. Laws § 28-6-22(c)

[8] RCW 49.58.110

[9] MD Code, Labor and Employment, § 3-304.2