Pay Transparency Trends (Legal and Social)

New Rules on How Employers Manage Their Compensation Program

As employees begin questioning their pay, while pay transparency continues to grow in popularity, employers are scrambling to defend their pay practices.

Salary information is becoming more available formally, through legislation, and informally, through social media posts. Employees now have the valuable information to leverage conversations with their managers and challenge current compensation. 

States are beginning to require the publication of salary ranges for all classifications. Some examples of the trends in the legislation include:

• CA Equal Pay Act – Employers cannot ask about the previous salary and must disclose pay ranges if asked during an interview
• CO Equal Pay for Equal Work – Employers must include salary ranges and benefits information in every job posting as well as disclose promotion opportunities and keep track of job descriptions
• NY – Employers must post maximums and minimums on all job postings or promotions by November 2022 (extended from May 15th) 

More casually, there is a societal shift to make salary information less taboo. Coworkers are no longer ashamed of sharing how much they make in the company. A poll conducted in 2022 by YouGov Plc found that of their sample of 2,500 adults, 42% of Gen Z workers, ages 18-25, and 40% of millennial employees, ages 26-41, have shared their salary information with a coworker or other professional contact.

Many companies are not prepared to discuss the warrants for current salary ranges and are left with unhappy employees who still have pay concerns. Payscale has reported that employees are 50% more likely to leave if they think they are being paid below market, even if they aren’t. Some 57% of people paid at the standard market level believe they are underpaid, and 42% of those paid above the market think they are underpaid. This highlights the value of a compensation study where you can provide employees the ease of mind that they are being compensated based on their talent and skills in a competitive organization. 

Latest News in Pay Transparency and Minimum Wage Increases

Pay Transparency and Minimum Wage Increases: Are You Prepare to Meet the New Challenges?

If You Post A Job, You Must Post A Salary Scale

Starting in May and following a national trend in other major U.S. cities, New York City’s employers will be required to post salary ranges in their job postings. The law exempts temporary staffing firms as they provide this information to potential candidates. The legislation, meant to help correct pay inequities and discrimination, will make it unlawful not to include in job listings the minimum and maximum salary offered for any job in New York City. The range for the listed maximum and minimum salary would extend from the lowest to the highest salary that the employer, in good faith, believes it would pay for the advertised job, promotion, or transfer. Other municipalities are likely to follow as the law is a more significant trend toward pay transparency.

View a List of Cities Requiring Posting Salary Ranges

Pay Equity Efforts in the Public Sector Suffers a Setback

In a setback to proponents of workforce progressive policies, a law requiring board quotas from publicly traded companies with HQs in CA was declared unconstitutional. The law, Assembly Bill 979, signed in 2020 by Gov. Gavin Newson, set forth to increase boards’ composition by requiring publicly traded companies to have board members from underrepresented communities, including people of several races and ethnic groups and people who identify as gay, lesbian, bisexual or transgender. Proponents of the law argued that adding underrepresented groups to the board would aid racial and justice equality in the workplace. However, Judicial Watch, a D.C. nonprofit conservative advocacy group, filed a lawsuit in 2020, arguing the law’s racial, ethnic, sexual preference and gender-based quotas violated the state’s constitution’s equal protection clause. In response, Los Angeles County Superior Court Judge Terry Green ruled that the law violated the state constitution.

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Gender Pay Equity – Trending in the Wrong Direction

An initial analysis of proxy compensation disclosure by Equilar, a firm specializing in data-driven solutions for business development, board recruiting, and executive compensation, suggests that gender pay gaps increased in 2021, and in doing so, the gains recorded in 2019 and 2020 have essentially disappeared. According to an initial review of proxy statements relative to 2021, the median pay for women CEOs in the Equilar 500 was $11.8 million, or 18% lower than the median $14.5 million awarded to men. The initial figures seem to follow a two-year compensation difference between men and women. In reviewing past proxy information by gender, data suggests that the average pay for women went from $12.2 million in 2019 to $11.8. The average compensation for men has moved from $12.2 to $14.5 million for the exact period. Even though public and private companies work to adopt pay equity policies, the conversation around gender equity will likely grow louder. Also, this may activate boards and regulatory agencies for measures to minimize the gains achieved in the last few years.

Minimum Wage To Increase, Again, In Parts of Los Angles County

In time for most companies’ budgeting season, companies in the unincorporated part of Los Angeles County and the City of Los Angeles will need to manage another new round of increases to their minimum wage scale. The minimum wage in unincorporated LA County will be increasing from $15.00 to $15.96 per hour on July 1, 2022. The ordinance applies to employees who work at least two hours a week within unincorporated areas of Los Angeles County. The minimum wage in the City of Los Angeles will increase from $15 to $16.04. The wage scalation index, tied to consumer prices, and part of the City’s effort to curb poverty, has spiked considerably over the last few months, pushing the City to boost hourly rates above those in the County. This latest increase is a continuation of the annual increases that began in 2016 and now apply to all employers regardless of employee count. The minimum wage will continue to increase each year on July 1 based on the Consumer Price Index for Urban Wage Earners and Clerical Workers.

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March 14, 2022