As pay transparency laws go into effect, businesses push back

14 Jul As pay transparency laws go into effect, businesses push back

In June, legislators in New York State signed off on a bill that would require employers in the state to share compensation details for all job postings. The bill arrived on the heels of another that recently passed in New York City, which will take effect in November and apply to all employers in the city with four or more workers.

It’s also the latest in a string of bills across the country that have sought to secure transparency around compensation, as part of a years-long effort to address pay inequities in the workplace—and despite pushback from the business community. Both Colorado and Washington State have passed similar legislation in recent years, and advocates in California are pushing for a bill that would not only enshrine wage transparency in job postings but also force larger employers to publicly disclose anonymized pay data; in Rhode Island and Connecticut, the law now dictates that employers must provide a pay range if an applicant requests it.

“We’re definitely seeing an exciting trend around more and more states passing salary range transparency laws,” says Andrea Johnson, a policy director for workplace justice issues at the National Women’s Law Center. “It’s really taken off over the last year: We now have seven states that have passed some form of salary range transparency.”

Experts say this kind of transparency can help mitigate wage discrimination and address the gender pay gap, which is particularly stark for Black and Latinx women. And as employers continue vying for talent in the tight labor market, advocates believe that disclosing pay is actually an added bonus. “We’re also seeing employers increasingly voluntarily post salary ranges in their job announcements,” Johnson says. “Over the last few years, and especially with the labor market right now, employers are recognizing it’s to their advantage to be transparent about salary ranges.”

Being more transparent about pay can also make for a more efficient hiring process for employers and recruiters, who could waste less time on candidates who aren’t a good fit for the job in question. When potential hires have insight into compensation from the start, they can make a more informed decision about whether to bother applying for a job, rather than going through several rounds of interviews and withdrawing when compensation negotiations fall apart later in the process.

Still, many employers don’t see it that way. Even as pay transparency has grown more popular—largely in blue states, where there’s more of an appetite for such laws—businesses have resisted efforts to pass legislation or have tried to amend or circumvent it. One argument is that compensation figures should be confidential and disclosing them makes it harder for employers to compete for talent, by empowering other companies to match or exceed their pay; another concern is that pay could vary for remote jobs depending on where workers are based, making it harder to provide an accurate compensation range. In fact, after Colorado’s pay transparency law was enacted, several employers reportedly posted remote jobs that explicitly stated they wouldn’t accept applicants from the state. (That said, these jobs represented a fraction of the listings in Colorado, according to a 2021 analysis.)

In New York City, the pay transparency law that passed last year drew immediate pushback from the business community, which ultimately led the city council to amend the bill and delay its effective date from May to November. “It was an effort to gut the bill,” says Beverly Neufeld, president of PowHer, a coalition of organizations working on women’s issues in New York State. “But advocates and workers spoke up, and the city council did respond. The bill was by no means gutted, but it was tweaked. It’s still protecting almost all workers, and it does cover all employers if they have four or more employees.” Though much of the bill remained intact, it was altered to be friendlier to companies and shield them from litigation (for example, by only allowing current employees to sue over violation of the law). It also included a carve-out that would exempt any job postings for remote positions outside of New York City from including wage disclosures.

It’s not hard to imagine how businesses could take advantage of carve-outs like that, especially with the New York State bill in flux. Without a state law that matches the law enacted in New York City, some companies could theoretically post a job outside of the city to circumvent pay disclosures. That’s one reason why Neufeld and others are advocating for a change to the proposed state law, which would only apply to employers with 20 or more workers. “If you exclude all the companies that have fewer than 20 employees, you’re actually excluding almost a half a million establishments and [nearly] two million workers,” Neufeld says. “And a lot of these workers are in low-wage jobs, and many of them are women [or] women of color. So if a state stands up for equity, then it has to pass laws that create equity.”

In California, where employers are already required to provide wage data on request, advocates are taking things one step further. A new bill that recently passed the state senate would secure disclosures in job postings while also building on an existing law to expand a pay-data reporting requirement: Employers would be expected to publish anonymized pay data for its workforce, including data on contract workers and those hired through third-party vendors.

The bill is designed to make those company reports public and capture data on the contract workforce that much of Silicon Valley relies on—which pro-business groups in the state have argued amounts to “public shaming,” according to Jessica Stender, senior counsel for workplace justice and public  policy at Equal Rights Advocates, a nonprofit focused on gender justice in the workplace. “We see this as an opportunity for companies to uncover problematic pay trends—gender- and race-based pay disparities—and fix them, as opposed to shaming them,” she says.

The bill’s dissenters have staked their opposition on claims that sharing these reports publicly could open them up to potential litigation (even though they only call for aggregate data), though Stender also believes part of the issue is that companies don’t want to take responsibility for how contract workers are being compensated. “But from a workers’ rights perspective, and you would think from a policy perspective, it makes even more sense that even if you are contracting that work out, you ensure that workers are being paid fairly,” she says.

While businesses could continue to find ways to work around or fight these bills, there’s no denying the impact of multiple states adopting similar legislation. Even with the rise of remote work, employers will struggle to resist this kind of legislation if several states—including those that are hubs for tech companies and other leading employers—require wage disclosures. With workers more empowered than they’ve been in years, it’s also a moment for employers to prove that their commitment to equity and inclusion in the workplace is more than just talk.

“[Before] the 2008 economic crisis, employers were a lot more transparent about salary ranges,” Johnson says. “Then the labor market shifted, and employers had more of the upper hand in some respects. They became less transparent and held that information close. And I think we might be in a time now where the labor market is shifting such that there are greater incentives for employers to be transparent.”

Source: Fast Company