In a bid to promote pay transparency and equity, an increasing number of states in the US are requiring employers to disclose salary data. The initial trend started in Colorado in 2021, and now a number of other US jurisdictions have followed suit, including New York City and the states of California and Washington.
The New York City law took effect in November 2022, and the California and Washington laws go into effect on 1 January 2023.
New York City (“NYC”)
The amendment to the NYC Human Rights Law (the “NYCHRL”) requires most employers to include a good faith salary range for all advertised job, promotion, and transfer opportunities.
Employers that violate the NYCHRL can be ordered to pay monetary damages to affected employees and be ordered to amend advertisements, create or update policies, conduct training and/or provide notices of rights to employees or applicants. Employers are also liable to civil penalties of up to US$250,000.
The NYC Commission on Human Rights has published guidance on the new law.
Washington
From 1 January 2023, employers in Washington who employ 15 or more employees will be required to disclose salary ranges to applicants and employees, pursuant to new provisions made to the state’s Equal Pay and Opportunities Act:
- Employers must include in postings for each job opening the salary range and a general description of all benefits and other compensation to be offered to the hired applicant.
- The employer is required to provide the salary range upon the request of an employee, who is offered an internal transfer to a new position or promotion.
- In violation of the above-said requirements by the employer, a job applicant or an employee may bring a civil action and recover actual damages, statutory damages equal to the actual damages or US$5000 (whichever is greater). Employers may also be subject to civil penalties.
The Department of Labor and Industries Employment Standards of the State of Washington has published guidance on the new law.
California
California law already requires employers to provide the pay scale for a position upon request by an applicant. However, this is expanded from 1 January 2023 and will require most employers to include pay ranges in all job postings. Employers will also be required to provide current employees with pay scale information for their positions upon request.
Furthermore, large employers will have new reporting obligations. The law expands the scope of current reporting obligations:
- Employers with 15 or more employees are required to include the pay scale for a position in any job posting, both external or internal.
- Employers will be required to maintain records regarding job title and wage rate history for each employee, for the duration of employment plus three years. The records will be open to inspection by the California Labor Commissioner and could be used to allow the California Labor Commissioner to determine if there is wage discrepancy.
- Private employers of 100 or more employees (including those hired through labour contractors) must submit an annual pay data report to the CCRD. The categories of information that must be reported to include the median and mean hourly rate by race, ethnicity, and sex within each job category.
- Individuals aggrieved by violations of the job posting disclosure requirements may bring a civil action. In addition, the California Labor Commissioner can order an employer to pay civil penalties of US$100 to US$10,000 per violation. Employers who violate the pay data reporting requirements may be liable to civil penalties of up to $200 per employee.
A summary of the changes in California is available in the Senate Bill No. 1162 published on the California Legislative Information website.
Hong Kong
In Hong Kong, there are no laws which require pay transparency. However, many global employers that embrace pay transparency in their home jurisdictions, either voluntarily or due to legal requirements, want to apply the policy globally, including in Hong Kong.
Legally, there is nothing preventing employers from operating a pay transparency policy in Hong Kong. However, we consider that employers should take note of the following:
- Historically pay is considered highly confidential. Certainly, it is a common clause in most employment agreements that employees must not disclose their salary – indeed it is sometimes described as an act of gross misconduct. While employers are unlikely to be bound by such confidentiality obligations, it would still be advisable to consult with employees before implementing a pay transparency policy.
- Most employees welcome salary transparency. Nevertheless, employers should be prepared to explain why the policy is being rolled out and the benefits of the policy.
- It is not uncommon for discrepancies to arise once pay becomes transparent. Issues usually arise when an employee in a certain role is paid at the bottom end or even beneath the stated salary range. To avoid unexpected surprises, employers should undertake a pay audit to determine what everyone is paid before the policy is launched. If there are discrepancies, the employer must be prepared to answer the questions that arise or fix the discrepancy.
- The wording of the policy should clearly confirm that it is guidelines / policy and should not give a contractual commitment to receive a certain level of pay.
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This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.
