“Pay Equity and Transparency Laws: Points to Consider”
One of the fastest growing areas of employment law is the push toward pay equity. “Equal pay for equal work” has long been a rallying cry for civil rights organizations and the gap between the pay rates and salaries of men and women and other protected classifications has been an ongoing issue since the 1960s when the Equal Pay Act became law. Despite the attempts to legislate employers’ pay policies to ensure salary equity, wage and salary gaps have continued to persist. The newest legislative tool to address these inequities has been the introduction of pay transparency laws.
Pay transparency laws have been passed in seven states and six localities. These laws generally require employers to include the wage range in job postings. The goal of these laws is to give job applicants a better understanding of the value of a position and to not accept a lower rate of pay because they were not aware of the wages and salaries paid to incumbents. Ironically, prior to the introduction of pay transparency laws, 21 states and 21 local governments enacted laws that prohibited employers from inquiring about an applicant’s wage history and, if inadvertently disclosed during the hiring process, from using that information to set the starting wage for the applicant.
Despite the prevalence of these laws, there continues to be a perceived inequity in wages paid to different employees. Pay differentials, when analyzed, can often form the basis for a discrimination claim. Employers who use years of experience or education as part of their salary determinations are often negatively impacting women and people of color. Women because they often have shorter work histories due to child bearing and child rearing and people of color because they often face greater barriers to obtaining a higher level of education.
When determining whether the equal pay requirements of state or local governments are met, employers must pay careful attention to how the state or locality defines wages. Some statutes include bonuses, including hiring bonuses, to determine whether individuals who are performing work of similar value to the company are receiving comparable compensation. Using a hiring bonus to entice an individual to accept a position with an employer can be done, but the value of that hiring bonus must be considered when determining pay equity in states that define wages broadly enough to include bonuses.
One state, in recognition of the important of recruiting incentives, passed a temporary law which excepted hiring bonuses from the definition of compensation for pay equity purposes. Oregon’s temporary exception was driven by the difficulties employers were facing in hiring due to the impact of COVID and the “great resignation.” That exception has now expired and employers must once again include the value of any hiring incentives in the wages and salaries when looking at pay equity.
Hiring decisions are often the subject of discrimination claims and the addition of pay equity as a focus adds another element to the decision-making process. Employers must ensure that they are in compliance with all aspects of the equal opportunity laws, including those related to pay equity. myHRcounsel can assist you in all aspects of the hiring process, from the job posting to the ultimate hiring decisions, and ensure that you are meeting your compliance obligations.