In this episode of The Proskauer Brief, partners Evandro Gigante, Allan Bloom and special employment law counsel Laura Fant discuss the New York City Pay Transparency Law, which is set to come into effect on November 1, 2022. The law covers employers with four or more employees and generally requires covered employers who post a job, promotion, or transfer opportunity for a position that can or will be performed, at least in part, in New York City to disclose the minimum and maximum annual salary or hourly wage that the employer in good faith believes it would pay for the position. Tune in as we discuss the new law in order to prepare employers for its upcoming implementation.

Evandro Gigante: Hello and welcome to The Proskauer Brief: Hot Topics on Labor and Employment Law. My name is Evandro Gigante, and with me today are Allan Bloom and Laura Fant. Today we’re going to discuss the New York City Pay Transparency Law, which is set to come into effect on November 1, 2022.  As many of you know, the law covers employers with four or more employees, generally requires the covered employers who post a job promotion or transfer opportunity for a position that can or will be performed at least in part in New York City, requires them to disclose the minimum and maximum annual salary/hourly wage that the employer in good faith believes that it would pay for the position. So today I’m going to pose a series of questions to Laura and Allan about the new law in order to prepare employers for its upcoming implementation.  So first Laura, what exactly does the law require for positions that employers plan to hire for?

Laura Fant: Thanks, Evandro.  So the law requires that if an employer is advertising a role, as you noted, that will or can be performed in New York City, the employer will have to state a good-faith range of base salary or base hourly wage for the role.  And this posting requirement will apply to really all forms of advertisement.  So traditional advertising in newspapers or other publications, posting on bulletin boards, whether internally or externally, on online recruiting platforms such as Indeed, Monster.com, and other Internet postings as well such as on for example, LinkedIn. Advertisement is defined under the law as a written description of an available job, promotion, or a transfer opportunity that is publicized to a pool of potential applicants.  So it’s worth nothing first that that pool of potential applicants could include existing employees as well, if it’s a role for which existing employees may be eligible for a transfer or promotional opportunity.  It is also important to note then that any time really an employer is publicizing a role to a group of people, this law is likely to apply. However, if an employer or an agent, so for example, a recruiter acting on their behalf, is engaging in one-on-one outreach, so reaching out individually to a specific candidate for a particular role, the law is not likely to apply, because this would not be a publication to a pool of potential applicants.

Evandro Gigante: Thank you.  So moving on, Laura, what should employers be thinking about with respect to the content of these advertisements?

Laura Fant: So as I noted, the law only requires that base salary, so base hourly rate or base salary be included in the posting.  So an employer does not need to include such things as commissions, bonuses, stock options, benefits.  They of course could include that information if they wanted to, but that’s not required by the law.  It’s also important that the employer keep in mind that it’s a good-faith requirement.  The requirement for the range is what the employer believes in good faith at the time of the posting, they are planning to or willing to pay for the role in question.  While the law does not require additional information, employers may want to think about whether they wish to disclose examples of factors that they may use to determine what specific salary may be offered to a particular candidate, right.  You’re required to post the range, but what about what will determine what particular salary within that range may be offered to any particular candidate?  So for example, experience, skills, the needs of the job, and perhaps even job location if the job could be performed in different jurisdictions.

Evandro Gigante: Thank you, Laura.  And it would also seem that having those factors identified in the job posting may help for example, incumbent employees come knocking on the door asking why it is their salary either falls at the low end or outside the range, and what factors the employer plans to use in determining the offers that it intends to make?

Laura Fant: I completely agree.

Evandro Gigante: I do think that’s something worth thinking about.

Laura Fant: Yes.

Evandro Gigante: So Allan, more practically, how should employers think about going about to determine the actual salary range?

Allan Bloom: Evandro, that’s been the real challenge for a lot of employers.  You could look at what you’re currently paying employees in the role.  You could look at what the market is doing.  You could look at what other employers are paying or are offering.  You can get a compensation study or analysis.  It can depend on the job location, for example, if the job is one that can be performed in a number of locations or even remotely.  So putting aside the outliers, you should have some sense of what you think a role is worth, or at least what you’re willing to offer to any candidate that might apply for it, putting aside their unique credentials or circumstances, at least from a base pay standpoint, as Laura said.  Because you don’t have to state bonuses or incentives in an advertisement or a posting.  So there’s a lot of room to do what you have to do in terms of a total compensation philosophy at the end of the year for example.  Again, for clients, this is the most time-intensive and resource-intensive part of the exercise, figuring out what the range is, the good-faith range is.  But for a number of reasons, we think it’s an exercise that over time, will end up reducing the risk of pay equity and pay discrimination and similar claims.

Evandro Gigante: Thank you, Allan.  So Laura, when employers are constructing their ranges, do they need to actually pay within the range that’s being paid to incumbent employees?

Laura Fant: So that’s a great question.  And I think a broader question is even does the employer have to, at the end of the day, pay within the range that is posted in the job posting, right?  So as I noted earlier, the requirement under the law is that the range that’s posted at the time be what the employer believes in good faith it will pay for the role in question, right.  So with regard to incumbent employees, there certainly may be factors that have either shifted over time with regard to the role, or there’s jurisdictional factors, geographic factors, right.  This current role that’s being posted may be able to be performed in a different jurisdiction than where the existing role is currently being performed.  All of these factors may result in a range that differs from what current incumbent employees are being paid for the role.  And I think Allan’s going to speak a little bit more about that in a second.

But for the broader question of do employers have to actually end up at the end of the day paying within the stated range in the posting, and I think the answer to that is not necessary, right.  If the range that’s included in the posting is what the employer believes at good faith at the time of the posting they are willing to pay, if it so happens that a candidate comes along who is just really this extraordinary candidate, right, they have skills, they have experience that you were not expecting to see in response to the posting.  Or perhaps you have a really strong candidate who ends up demanding a higher salary than what is being posted or is being offered a competing role at a higher salary that you want to try to match, that is okay under the terms of the law, so long as what was originally the range being posted is what was believed at the time would be the good faith range for the role.

I would caution however, that if employers find themselves frequently going outside of the range of what was initially posted, this could end up presenting some risk, right, because it could ultimately be used as evidence that the employer’s stated range is not in fact their good faith belief on what they’re going to be paid.  So I’d say in any given instance, there is some freedom to go outside the range, but it’s best to think at the outside about what exactly you would expect to see from the pool of candidates, right, what level of experience, what level of skills you would expect to see so that your range is as accurate as you would expect it to ultimately be.

Evandro Gigante: Right.  And of course as Allan pointed out earlier, the salary range is all that needs to be posted so that an employer that’s looking to pay an applicant some more money to come in the door could do so through bonuses, incentive compensation, commissions, and other forms of compensation that would not be required in the posting.

Laura Fant: That’s exactly right.

Evandro Gigante: So Allan, what impact could the salary ranges have on current employees, and in particular those who are at the low end or even outside of the posted range?

Allan Bloom: The reality is particularly, once this law takes effect on November 1^st, you may have current employees looking closely at your job postings, because they will be out there now for everyone to see, including your own employees.  So we expect employees to be looking at those postings and comparing them to what they’re making, to what you’re now offering, for example, to people who are applying.  So that’s to be expected.  It’s all in the service of transparency, the underlying purpose of the law.  So in my view, a big part of this exercise is that it forces employers to look closely at what they are currently paying their current employees and why they’re paying their current employees what they are.  There may be great reasons why a current employee is below the range of what you’re currently posting for the same role.  The market changes, it’s more expensive these days to get employees or the ones that you want.  Or it might be the case that you need to revisit what you’re paying your current employees.  I think the answer if you can’t come up with a good defensible reason why a current employee is being paid less than what you’re now posting in an advertisement, then you should be engaging in a pay-review exercise.  And at the end of that, you may be well-advised to adjust your current salaries.

In any event, you have to be prepared to answer questions from current employees who are at the low end or below the range of what you’re now posting.  And human resources, employee relations, and even individual managers should be trained and prepared to answer questions from current employees around why their compensation is what it is compared to what the employer is now posting or advertising publicly.

Evandro Gigante: Thank you, Allan.  And how do you see the law playing out in terms of enforcement?

Allan Bloom: Well the low-hanging fruit is going to be the employers that don’t post a range at all, right.  That’s the easy violation; it’s easy to see.  And some of that may be intentional; some of that may be inadvertent.  And I think it will come down to what the employer can reasonably control.  So for example, you’re an employer, you have your own postings internally, you have your website, you have your intranet, you have your bulletin boards.  I think the city would conclude that you absolutely can control the content of those platforms, and there’s no reason why you shouldn’t be stating a range in good faith as of November 1st.  So then if you post in a newspaper for example, which sounds a little archaic, but still quite common for a number of smaller business particularly, you should make sure the copy is compliant.  And if the copy is not compliant, I think you will see some enforcement around that.  And I think the city would expect an employer to for example, call up the newspaper and make sure that what they are posting effective November 1^st states a good-faith range.

I think the more modern reality is that if an employer has an ongoing relationship with an online platform, a Monster, Indeed, I think the city will expect that employer to be on top of what that vendor or platform is posting as of November 1^st for their roles.  And so I think that’s how enforcement will play out.  On the other hand, if there’s an older job posting that is just picked up by other websites and republished such that the employer really can’t control that, I don’t think you’ll see a lot of liability around that if the city investigates.

So again, I think not posting a range at all is going to put you on the radar from an enforcement standpoint.  The more difficult violation to prove will be where the range is not in good faith.  And it’s just, it’s difficult to prove what is in good faith, what is not in good faith.  So in my own view, I don’t think the city will dedicate a lot of resources to testing the edges of an otherwise defensible range.  But as we said earlier, if you regularly make offers outside of the range that you’re posting, that could well be evidence of an absence of good faith.

Evandro Gigante: Agreed, agreed.  So finally, Laura, is there any last-minute practical guidance that we can give employers as we sit now about two weeks away from the effective date of the…

Laura Fant: Sure, I think there’s two additional things that I would like to add that employers should be thinking about, one of which Allan kind of touched on just now, looking at postings that are currently active at this moment in time that are expected to remain active after November 1^st.  And if the employer has some reasonable level of control over those postings, ensuring that a range that is compliant with the law gets added to those postings, right, based on an interpretation of the law, we think that simply because a posting was put up prior to November 1^st, if it remains active, it will be a covered posting for purposes of the law.  And then the second is around training.  And Allan mentioned training earlier in the context of how to speak with current employees about questions about what may be in a job posting as compared to their existing salary.  But I think more broadly, employers should be thinking about should some training or at least some guidance be given to employees who have the ability to or are likely to be posting jobs themselves, right.  So certainly there are going to be managers, there are going to be hiring teams that will be tasked with or have this express authority to post jobs on behalf of the company.  They should certainly be made aware of these requirements so that their postings are compliant.

But when we think now about the easy accessibility for any employee to share information about an open role on LinkedIn or on some other social media platform, if that employee is publicizing that role to a pool of applicants, to a group of people, the law is likely to apply even to that type of posting.  So making sure that really all employees understand that this requirement is now in place and that they understand that even if they are posting on their own accord or of their own behalf, that it’s still on behalf of the employer and may be covered by the law.  And this is particularly important for employers who may offer incentives to employees to recruit new hires to the business.  In that case, all employees may be likely to be publicizing a given role and therefore should be made informed about the requirements of the law.

Evandro Gigante: Thank you Laura, I appreciate that, and I certainly agree with those practical steps.  Thank you for joining us today on The Proskauer Brief.  Stay tuned for more insights on the latest hot topics in labor and employment law.