Pay equity and transparency in the workplace has been a growing focus of lawmakers and a societal concern, especially in recent years. Several state and local jurisdictions across the country have passed a range of laws aimed at closing wage gaps based on gender and race, which still exist in many industries. In particular, laws focused on pay transparency have been on the rise, with over a dozen state and local jurisdictions passing such laws in the last few years.
Pay transparency laws generally require that employers disclose salary information to current or prospective employees in certain circumstances. However, these laws vary among jurisdictions in terms of where, when, how and to whom the necessary disclosures must be made, as well as the specific information that must be disclosed. For example, some laws require that employers include the relevant wage or salary range in all posted job positions, while others mandate that employees and prospective employees be provided with a wage or salary range for their particular position, either upon request or after a particular event (i.e., when an offer is made). These new laws not only impact employers in the restaurant industry from a legal compliance perspective, but also from a business and recruitment perspective.
Most recently, on December 21, 2022, Governor Kathy Hochul signed New York State Senate Bill S9427A into law. This new law, which becomes effective in September 2023, requires employers with four or more employees to include the compensation or range of compensation, as well as a job description, for every job advertisement, promotion, or transfer opportunity if the job can or will be performed, at least in part, in the State of New York. Consequently, this law requires that information related to compensation and job duties be provided for all external and internal opportunities that arise and which are posted. These requirements are similar to those established under New York City’s ordinance (which became effective in November of 2022) and Colorado law (which became effective in January of 2021). In addition to pay disclosure requirements, employers should be aware of other requirements imposed by pay transparency laws, such as notice and recordkeeping obligations.
Employers may face a range of consequences for violations of pay transparency laws, including an investigation conducted by their state’s Labor Commissioner, civil penalties, and/or a private right of action against the employer. Therefore, understanding all obligations under these laws is critical for employers. While the laws passed by New York State, New York City, and Colorado maintain some of the more robust requirements for employers thus far, several states are considering implementing or revising pay transparency laws and may impose more stringent requirements in the coming years. Interestingly, the trend with regard to these laws is that all jobs are covered by the job posting disclosure requirement, if the job could be performedin the relevant state, which makes their purview expansive. For example, a restaurant that is posting for a job in New York must include this information in its regional or nationwide posting.
As the restaurant industry continues to face a tight labor market, employers might be concerned about how these pay transparency laws will affect their business from employee relations and recruiting perspectives. On the one hand, employers may be concerned that they will be at a disadvantage in the hiring process because potential employees and competitors will have access to their pay information, which could affect an employer’s ability to negotiate pay. On the other hand, job advertisements that include pay information may attract more and better-qualified applicants. Including information about pay up front will likely save employers time during the hiring process, as applicants will be able to make a more-informed decision about whether to apply. Further, employers will more easily be able to review the wages, and potentially the benefits, of their competitors to determine how to competitively set wages.
Such information may also serve as a tool for retaining employees if they are able to compare their current situation to that of their co-workers and those working for a competitor. These laws may become more prevalent as additional states consider their merits, so it is important for restaurants and employers across the hospitality industry to have a strategic plan for leveraging such new compliance mandates.
As a result of these laws, employers should remain cognizant of their legal obligations and understand the scope and coverage of such laws. Employers may wish to review and revise applicable hiring and employment documents, materials, procedures and processes to ensure compliance with relevant laws. Even employers that are not yet subject to any pay transparency laws might consider auditing their pay practices and establishing some guidelines for salary or hourly wage ranges for positions within their organizations. This might include evaluating compensation policies and practices, with regard to starting compensation, merit increases, promotions, and incentive pay.
Employers will want to incorporate any changes to pay practices in a strategic manner, consistent with best practices and legal requirements in this area. Employers seeking advice on compliance with, and implementation of, pay transparency laws and/or best practices for their organization are encouraged to seek competent legal counsel.
Abby Warren and Kayla West are partner and associate, respectively, of the law firm Robinson+Cole.