Setting a salary range that could pass muster if challenged by regulators and plaintiffs’ attorneys is one of the biggest challenges facing businesses that must comply with New York City’s pay transparency law. Legal experts recommend that employers use objective factors in setting pay ranges and conduct pay equity audits.
Employers, even those based outside the city, must comply with the law if they have four or more employees, one of whom works in the city, and are advertising in the city to fill positions. The signature requirement is to post a “good faith” salary range in the ad for each job, promotion or transfer opportunity that would be performed, at least in part, in the city as of November 1.
The law is aimed at preventing pay discrimination through increased transparency. Equal pay advocates say employers are hindered from offering lesser pay to women and minorities if they have to disclose the salary range at the beginning of the employment process.
Setting a range
New York City’s Commission on Human Rights has defined “good faith” to be the salary range that the employer believes it will pay the successful applicant, said Nicholas Pappas, an attorney in the New York office of Dorsey & Whitney. Open-ended ranges such as “$50,000 and up” are not allowed. The salary must include a minimum and maximum range.
Salary means the base annual salary or hourly wage but does not include other forms of compensation such as health and retirement benefits, according to a fact sheet from the NYC Commission on Human Rights.
“This requires some judgment by the employer. There is no guidance on how big the range should be or whether it has to embrace the current pay for workers doing the job,” Pappas said.
Because the law is so new, legal experts are unsure what enforcement will look like although the penalties for noncompliance are quite steep. But they have predicted that plaintiffs’ attorneys will use the information to bring pay discrimination lawsuits.
In defending against accusations of unequal pay, the employer could say that the successful applicant obtained higher compensation because of their skills, education, relationships and other attributes, Pappas said.
Andrew Turnbull, an attorney in the Washington, D.C. office of Morrison Foerster, told Legal Dive his firm is advising employers as much as possible to come up with objective factors such as market data, skill level and experience to explain how ranges are set and how people would fall in those ranges.
Objective measures can provide a defense if regulators examine your books and in pay discrimination claims, Turnbull said.
Internal pay audit
In addition to objective factors, affected employers should consider conducting an internal pay equity audit with the assistance of legal counsel. An internal pay audit can help employers discover whether they have pay equity issues. Involving an attorney means that the information discovered during the study is subject to the attorney-client privilege and, as a result, protected from disclosure.
However, in-house counsel might want to tread carefully when conducting a pay audit. “With in-house counsel, there can sometimes be a question of whether that individual is wearing an ‘attorney hat’ or a ‘business hat.’ If the attorney is wearing more of a ‘business hat,’ then the pay equity audit may not be privileged,” Turnbull said.
Turnbull also mentioned that companies need to be careful about inadvertently waiving the privilege by allowing individuals outside of the privilege team to see the audit results.
Many employers are concerned how publishing the wage range will affect salary negotiations, Turnbull said. Make sure you have tight job descriptions upfront before you post the job ad, Turnbull suggested. Make sure that you have an objective basis to explain why the job applicant is being put in that part of the wage range. For example, the successful job applicant might be on the lower end of the years of experience listed for the job, he said.
One attorney said that employers who want to vary the salary aren’t locked into the public salary range. “Companies have a lot of flexibility with how to respond to these requirements. For example, as far as I’m aware, none of the laws require that you actually pay what you post. In fact, one of the complaints that I’ve seen since these laws have taken effect is that the posted ranges can be really broad — sometimes as much as $100,000 or more, based on experience,” Peter Glennon, founder of the Rochester, New York-based Glennon Law Firm P.C. said in an email.
Large companies need a process
Turnbull recommends that employers, especially larger companies that have a number of people creating job postings and pay ranges, have compliance processes and procedures in place because of the harsh penalties. While the first violation is a “freebie,” he said, city regulators have the authority to impose civil penalties up to $250,000 for a second violation.
Safest course for compliance
“Covered employers should follow the new law when advertising for positions that can or will be performed, in whole or in part, in New York City, whether from an office, in the field, or remotely from the employee’s home,” according to the city’s Commission on Human Rights. The law applies to a posting for any position that could be based in New York City, Turnbull said.
Turnbull said a “lot of companies” are trying to figure out what to do if they don’t have any people in New York City. He said the “safest course is to comply if a position can be performed in New York City.”
“The law applies to New York City residents, whether the position is based there or you are simply advertising there. This is complicated by the fact that most jobs are now posted online, where anyone could see them. If you want to be on the safe side, it’s smart to comply with the salary transparency regulations for every jurisdiction that has them,” Glennon said.
Pappas also noted that employers that hire search firms where the search firm doesn’t advertise but “cold calls” prospective job applicants might not be covered by the new law.
Similar laws in other states
City and state legislatures have been enacting salary history bans, that forbid employers from asking about previous pay and in some instances require that employers provide pay ranges upon request, over the past several years. New York City has had a salary history question ban in place since 2017.
The newest wrinkle in the trend toward fighting race and gender-based pay differences is requiring that employers provide salary ranges in job postings. At the present time, just a few jurisdictions have such a requirement. For example, Colorado also requires pay disclosure in job postings. The Colorado law went into effect in January 2021. California and Washington state have similar laws going into effect Jan. 1, 2023.
More pay disclosure laws in job postings could be on the horizon. A number of states are reportedly considering such a requirement. New York state lawmakers approved a pay transparency bill similar to the New York City law but the state measure has not yet been sent to Gov. Kathy Hochul for signature.
Wide ranging impact
“New York City is a huge place for employment. With this remote job posting issue, companies that have people that work all over the place are much more likely to have a remote worker in New York City than they are in Colorado, so the tentacles of this law can be broader than in any other jurisdictions,” Turnbull said.