By Katie Kiernan Marble and Karim Sampson
Introduction to Pay Equity in the United States
Previously, we discussed in Part 1 of our Pay Equity blog series, that companies making proactive efforts to ensure pay equity will have better luck with employee recruitment, retention, and satisfaction. Pay equity is the process by which employers work towards reducing pay disparities among employees based on race, gender, and other protected categories. In Part 2, we are going to dig deeper into what has been done at a state level in the United States to ensure employers reduce gaps towards reaching pay equality, what laws have been enacted towards that goal, and the trends that employers need to consider implementing to get ahead of future compliance obligations.
Pay Equity v. Pay Transparency
Pay equity is a concept that equal work deserves equal pay, regardless of each employee’s protected categories. However, even though legislation to protect this concept exists in the United States at a federal level through the Equal Pay Act and Civil Rights Act, it has not eliminated the wage gap existing in the workforce. As a result, states have become more active in implementing and enforcing pay equity laws, including pay transparency requirements, discussed in further detail below.
Pay transparency requires an employer to disclose information about employee compensation. Some states require employers to disclose this information in job postings, make it available during the initial interview process, or upon request.
Federal Pay Equity Laws in the United States
The US has enacted the Equal Pay Act of 1963 and Civil Rights Act of 1964, which require employers to pay men and women equally for substantially similar work and prohibit employers from discriminating against employees based on race, color, religion, sex, or national origin. The only exceptions to this requirement include where payment is made based on (1) a seniority system; (2) a merit system; (3) a system which measures earning based on quantity or quality of production; or (4) a differential based on any factor other than sex.
State Pay Equity Initiatives
Although there is no federal pay transparency law, certain states have enacted local laws regarding pay transparency, either to require disclosure of salary ranges to applicants at a certain point in the hiring process, upon request, or in job postings. Others have pay equality initiatives through specific equal pay or nondiscrimination laws. Some states like Mississippi have not enacted any laws. And others, such as California, have enacted several provisions that aim to reduce wage gaps through nondiscrimination and pay transparency laws, prohibiting retaliation, and providing for damages or causes of action for noncompliance. Pursuant to equal pay provisions, employers may be required to go further and show or report company ranges and wages.
State and Local Pay Equity Laws
As more and more employers are hiring in a number of jurisdictions, hiring more remote employees, or a combination of both, employers have to pay attention to pay equity requirements across the country.
While many states have long had laws on the books requiring equal pay for equal work, some states have gone beyond requiring pay equity reporting requirements. Examples of pay equity reporting laws include:
- California requires private employers of 100 or more employees (or 100 or more workers retained through labor contractors) to submit an annual report including pay, demographic, and workforce data; and
- Illinois has a law that requires private businesses with 100 or employees in the State of Illinois to report payroll data to the Illinois Department of Labor.
Current pay transparency requirements include:
- California requires employers with 15 or more employees to include a pay range in job postings;
- Colorado requires all employers to disclose pay rages in job postings;
- Connecticut mandates that employers disclose a salary range during the earlier of (1) the applicant’s request; or (2) prior to or at the time the applicant is made an offer;
- Hawaii requires employers to include an accurate job range in job postings;
- Illinois employers must include a wage scale in job posting as well as a general description of benefits included in total compensation;
- Maryland applicants must be provided a wage scale upon request;
- Nevada mandates employers must disclose wages/ranges to applicants after initial interviews and to current employees applying for an internal promotion/transfer;
- New York employers must disclose salary ranges if the role can or will be performed in New York;
- Rhode Island requires employer to disclose salary ranges for applicants upon request or before discussing an offer of compensation; and
- Washington employers must include salary information in all job postings.
This list is not exhaustive, and many states also require employers to disclose pay ranges to current employees, and in some cases, benefits information must be included in postings. Additionally, employers are typically prohibited from interfering with employees discussing compensation among themselves. New pay equity and transparency laws are being proposed and/or implemented in many locations, so employers need to stay on top of new laws as they become effective. Are these efforts working? Maybe based on data from the National Women’s Law Center, which indicates that states like California and New York have higher pay equity. In California, women make 89 cents for every dollar earned by a male counterpart and in New York, that figure is 88 cents. States without pay equity laws, like Utah, have figures as low as 73 cents.
What is the Trend for Pay Equity in the United States?
So, what do employers need to do? Employers must understand their company’s population, analyze the data, and follow the trends. By analyzing data and identifying good practices that have positively impacted the wage gap, companies can stay ahead of legal requirements. Also, it’s the right thing to do!
Regardless of your business’s size, or if you are private or public, you should consider the below trends applicable to all employers, especially considering today´s workforce can be mostly remote.
Please note that no matter if the states have nondiscrimination, pay equity, or transparency provisions, the main intent is the same and they all aim towards the same goals. Avoid discrimination in any way, take action to make sure you pay all of your employees the same for similar work regardless of any of the protected categories, be transparentinternally and externally, and keep records (and be ready to provide them when needed!).
- Nondiscrimination in payment of wages of someone of the opposite sex, another race, ethnicity, age, creed, color, sexual orientation, gender identity, national origin, religion, or disability for substantially similar or comparable work (skills, effort, responsibility, and similar working conditions).
- Prohibition of paying wages at a rate less than the rate it pays others based on above categories.
- Prohibition from asking applicant’s salary history, nor relying on this information.
- Allow employees to talk about or discuss their salary or wages.
- Disclose as much information as possible in job postings (e.g. salary range, general description of bonuses, commissions or other forms of compensation, general description of benefits). Disclose this information upon request for existing staff in case of promotions or change in positions.
- Notify employees of promotional opportunities.
- Keep job description and wage rate records, by any of the above categories.
- Consider retaliation illegal (e.g. discussing wages, filing a claim against the employer).
- Consider possible penalties, cause of action or liability for noncompliance.
- Make sure you provide your employees with the required postings/posters.
In our next post, we will provide you with an overview of pay equity regulations and requirements in EMEA. Stay tuned!
About: modCounsel provides a legal team-as-a-service for growth companies. Clients ranging from start-up founders to public companies leverage modCounsel for flexible and integrated expertise across employment and other areas of business. modCounsel is a minority- and women-owned law practice founded by in-house legal executives with a global team now across three continents.
