Wage transparency has become a hot topic in US employment law recently. Wage transparency laws are created to facilitate equal pay in the workplace. Previously, employers were known to require their employees to sign waivers or non-disclosure agreements that would effectively impose termination as a consequence of talking about compensation, which gave employees unequal bargaining power in wage negotiations and led to income disparities. In an effort to reduce that disparity, wage transparency laws have been growing in reach and popularity. According to the US Department of Labor, 20 states (plus DC) and the National Labor Relations Board (NLRB) have instituted some type of wage transparency protections.
However, not all of these protections function the same way. One way the legal experts at SixFifty have separated these types of wage transparency laws to understand their differences is by categorizing them as either active or passive.
In an active type of wage transparency law, it requires some positive effort on the employer’s part—they are required to do something.
Conversely, in a passive system, the law merely restricts employer behavior—they are prohibited from taking an action.
Passive wage transparency laws
Some of the more proactive of the passive protections (as we’ve termed them) act as a measure protecting employees’ rights to discuss their income. The way these laws work is by prohibiting employers from engaging in policies or practices that would limit employees’ ability to disclose, discuss, or otherwise inquire about their wages or the wages of other employees. For instance, if an employer has a policy in their handbook restricting employees’ rights to discuss wages, they could be subject to liability.
There are also some passive laws that are more reactive. Those types of restrictions target retaliatory actions an employer might take in response to an employee discussing their wages. In that situation, the law would only have teeth if the employee suffered a pay cut, demotion, termination, etc. based on the fact that they shared or asked about wages. While the employer in this case may not have a written policy about the matter, the effect of their actions was to discourage discussion of wages.
States vary on the types of wage transparency laws they employ, but one law that is universal across the states comes from the NLRB. Under that law, covered employers may not prohibit their employees from inquiring about, discussing, or disclosing their wage information or that of other employees. The NLRB provides a useful webpage to help employers determine whether they are covered under the act.
In addition to the federal NLRB requirement, below is a list of jurisdictions that have some variant of the laws discussed above:
- New Hampshire
- New Jersey
- Washington D.C.
Active wage transparency laws
Active wage transparency laws impose operational obligations on employers. Active protections require employers to provide information to different parties in different circumstances. Some require employers to provide information without prompting, some information must be provided upon employee request, some of it needs to be provided to government agencies when the company breaches an employee threshold, and some of it just needs to be kept for future reference. For instance, in California, employers with 15 or more employees must include wage ranges in all job postings, while Rhode Island only requires that to be provided upon an applicant’s request.
One of the most cumbersome requirements imposed by wage transparency laws is record keeping. In California, employers are required to keep a record of job titles and wage rates for each employee both during their employment and for three years after that employment ends. Additionally, employers with 100 or more employees are required to submit a wage data report with the California Civil Rights Department.
An important thing to note is that the Equal Employment Opportunity Commission (EEOC) requires all employers with over 100 employees to submit an EEO-1 form to them so they can determine, at a federal level, whether employers are engaging in discriminatory wage practices.
California isn’t the only state to impose active wage transparency protections. Below is a list of states that currently impose some type of active law (all of them also have the passive protections discussed above):
- New York
- Rhode Island
More wage transparency laws to come
The wage transparency movement has been growing significantly in the last couple of years and we expect to see it continue on that trajectory. We anticipate more states to pass new legislation on wage transparency this year. It will be important for employers to note which state laws they are subject to and how those laws function so they can avoid taking miss-steps or non-steps, as the law requires.
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