Equity Matters: 3 Trends to Watch in Pay Legislation

Is your company legally obligated to include pay ranges in its job postings? Are you prohibited from asking candidates about their salary history? An increasing number of organizations are answering yes to these questions, thanks to a spate of pay legislation emerging in the U.S.

Washington and California-based companies are among those heeding new mandates regarding pay. This September, California Gov. Gavin Newsom signed legislation that will require employers to include pay scale information in job postings starting Jan. 1, 2023. Similar pay legislation already exist in Colorado and recently went into effect inNew York City.

As pay legislation grows, many companies and business leaders are implementing good compensation practices — and not just because they’re required to. In fact, emerging pay policy in the U.S. reflects burgeoning demand and support for pay equity among workers and employers, noted Equal Rights Advocates Executive Director Noreen Farrell during the latest Equity Matters Chat.

In a discussion with members of the OPEN Imperative (Organizations for Pay Equity Now), a coalition of businesses committed to ending gender pay disparities in their organizations, Farrell identified the three biggest trends in pay policy.

#1: Pay transparency

Pay legislation enacting pay transparency policy are multiplying quickly. “Pay transparency is extremely popular,” Farrell said. “It’s what employees are talking about, and it’s the area where transformational changes are going to happen in the workplace.”

Pay transparency laws are diverse in their requirements. Some, like those in California and Illinois, require pay data collection and reporting. Pay legislation in Colorado and Connecticut require disclosure of salary ranges. Twenty states have passed legislation prohibiting pay secrecy rules.

Of course, many companies have outpaced legislators by instituting pay transparency policies internally — and for good reason. Such policies not only serve as the building blocks to good financial planning, they also build trust between employers and employees and support candidate recruitment and employee retention.

#2: Salary history

Twenty-one states and 21 cities have passed bans or limits around salary history. “Of the trends we see in pay policy, this one has the strongest momentum,” Farrell noted.

Salary history bans are also somewhat diverse in their exact requirements, but they generally prohibit employers from asking candidates what they made in previous jobs. The bans are designed to curb discrimination, and emerging research points to their success. A study on California’s wage ban, for example, showed the gender wage gap shrunk when employers were barred from asking about salary history.

#3: Expanding existing policy

When analyzing pay gaps, courts and legislatures are asking employers to use more nuance. “It’s not about equal pay for the same job title anymore,” Farrell said. Instead, employers need to consider responsibilities, job duties, competencies, experience and more.

For instance, California amended its Equal Pay Act in 2016 to create the “substantially similar” standard. Prior to the amendment, women claiming they were subject to a gender-based pay discrimination had to show that they made less than a man performing “equal” work. The softer “substantially similar” standard requires plaintiffs to show their jobs required similar — not equal — skill, effort and responsibilities. New Jersey, Colorado, Illinois and New York have also enacted such thresholds.

Some states have also expanded the characteristics their equal pay legislation covers, going beyond sex. Alabama, for example, added race as a protected characteristic. Oregon added all protected classes named by its civil rights law.

The pay policy landscape in the U.S. is evolving quickly, so employers must pay attention or risk infringing on pay legislation and being subject to steep fines. But employers shouldn’t stay abreast of policy updates simply for the sake of compliance. When employers implement pay equity practices, their talent acquisition improves, their employees grow more committed and their consumers become more loyal, Farrell said.

With the current economic uncertainty, rewards such as these are too good to ignore. When a company eliminates its pay gaps, it protects its business. That’s something worth doing — whether it’s inspired by a commitment to progress or a commitment to compliance.

Navigating the quickly developing landscape of pay policy is a tricky task, but it’s not a challenge you have to face alone. Join OPEN Imperative to find know-how, accountability and community. Our monthly Equity Matters chats will propel your pay equity efforts and connect you with leaders who share in your challenges and commitment to closing the gender pay gap once and for all.

Emily Sweet is VP of Social Impact and OPEN Imperative Lead at OpenComp. She writes about topics including pay equity and diversity, equity & inclusion (DEI). A board member of the National Council of Jewish Women, Emily is a veteran philanthropic leader and policy advisor with more than 20 years experience advancing bold solutions to big problems that drive impact and inspire collective action. Connect with her on LinkedIn here.