Navigating the Complexities of Pay Transparency Legislation

Hawaii and Washington, DC, each passed legislation that went into effect in 2024. Illinois and Minnesota rang in the new year with pay transparency legislation which took effect on January 1. And Massachusetts and New Jersey each passed laws which will take effect later in 2025.

The Salary Transparency Act is currently pending before US Congress. If passed, it would amend the Fair Labor Standards Act (FLSA) and make it unlawful for an employer to fail or refuse to disclose the wage or wage range for a position in a job posting, employee opportunity, or upon hire, and at least annually. The federal law would apply to all employers in the United States. The Act is in the very early stages of consideration and has not yet passed the US House or Senate.

Pay transparency laws typically require employers to disclose the wages or wage range for a particular position to current and/or prospective employees. However, each state’s transparency law differs slightly in its application, including which employers are covered, when employers must disclose pay ranges or other details, and to whom­­ employers must disclose them. For this reason, multi-state employers may find it challenging to comply with their obligations, an issue compounded by an increasingly dispersed and often remote workforce for many employers.

To help employers navigate the changing landscape, ArentFox Schiff has compiled a series of frequently asked questions and their answers.

FAQs

Do pay transparency laws apply to internal transfers or promotions?

Many states with pay transparency laws require employers to disclose the applicable wage range to existing employees offered a promotion or transfer. For example, laws in Connecticut, New York, and Massachusetts require employers to disclose a pay range in the event of an existing employee’s internal promotion or transfer. On the other hand, California and Hawaii’s disclosure requirements do not apply to internal promotions or transfers, and instead, focus solely on disclosures for external job postings and communications to potential new employees.

Can current employees request pay ranges for their current jobs from their employers?

In addition to requiring disclosures of wage ranges to applicants for employment, certain states also permit current employees to make reasonable requests to their employer with respect to the pay range for their current role. For example, the Massachusetts law requires employers to provide the pay range for a specific employment position to an employee holding that position, or to an outside applicant for the position, upon request. For a more comprehensive look at the forthcoming Massachusetts pay transparency law, you can read our full alert on the topic here.

How do pay transparency laws apply to remote workers?

State laws differ as to whether they require employers to apply pay transparency statutes to remote workers. Colorado, for example, has issued explicit guidance with respect to remote employees. The Colorado Department of Labor and Employment (CO DLE) clarified that the pay transparency rules apply to job postings for work tied to Colorado locations or remote work performable anywhere, but not to work performable only at a non-Colorado worksite. The CO DLE’s guidance further clarifies that postings for remote positions that can be performed anywhere are subject to the requirements in Colorado’s pay transparency law, the Equal Pay for Equal Work Act, even if the posting explicitly excludes Colorado applicants. Similarly, the Illinois and New York state pay transparency laws cover positions that will be physically performed at least in part in the state, or that will be physically performed outside the state when the employee reports to a supervisor, office, or other work site located within the state.

Which states’ pay transparency laws include additional reporting requirements?

California and Massachusetts also impose certain wage reporting requirements for covered employers. In California, a private employer with 100 or more employees and/or workers hired through labor contracts must submit annual pay data reports[1], which require employers to provide pay, demographic, and other workforce data, to the state Civil Rights Department. In Massachusetts, employers with 100 or more Massachusetts employees will have the additional requirement of submitting Equal Employment Opportunity (EEO) pay data annually to the Commonwealth. The first round of EEO reporting for covered employers in Massachusetts is due by February 1.

What are the penalties for failing to comply with pay transparency requirements?

Depending on the jurisdiction, employers may face varying degrees of liability if they fail to comply with pay transparency laws. For example, in Massachusetts, the state attorney general can bring an action against a covered employer for a violation of the law. Incremental fines are imposed for successive violations to further encourage compliance.[2] However, California’s pay transparency act takes this a step further by providing a private right of action for aggrieved parties.

Key Takeaways for Employers

Differences between state pay transparency legislation present complex challenges for multi-state employers. To navigate these complexities and to ensure compliance with national pay transparency standards employers should work closely with counsel to:

Update Policies: Align internal policies with pay transparency laws, including training HR personnel and hiring managers with best practices to ensure compliance with pay transparency for current employees and applicants.

Maintain Records: Keep up-to-date records on all employees to ensure compliance — especially important for remote employees.

Monitor Changes: Stay informed and consult with counsel with respect to legislative changes that could affect compliance obligations.

ArentFox Schiff is committed to monitoring developments in this area and is available to advise employers to ensure compliance with local and state transparency laws.