Effective May 15, 2022, New York City is requiring certain employers to disclose salary ranges in connection with advertising positions and considering applicants for employment. This action follows a consistent general trend, primarily through legislation at the state level, toward requiring transparency about what a candidate can expect to earn if hired. While pay transparency has existed in certain industries in both the private and public sectors for some time, this national legislative trend will surely sweep up employers for whom it is a foreign, and potentially unfavorable, concept. Moreover, in jurisdictions that currently lack pay transparency mandates, employers should not be surprised to see a shift to voluntary disclosure as industry approaches to this topic evolve.

The new law amends the New York City Human Rights Law (NYCHRL) to make it unlawful for an employer to advertise a job, promotion, or transfer without including the minimum and maximum salary for the position in the posting. It covers any employer with four or more employees located in New York City. Independent contractors are included in determining whether an employer is covered, while temporary positions advertised by temporary staffing agencies are not. Importantly, the law does not address how it applies, if at all, to remote work positions. The employer’s specific obligation is to post the “lowest to the highest salary the employer in good faith believes at the time of the posting” for a particular position. Whether the “good faith” element is satisfied would likely depend on the relevant information that is available to the employer, but that remains an open question.

In the past handful of years alone, legislators have enacted similar pay transparency requirements in states such as California, Colorado, Connecticut, Maryland, Nevada, Rhode Island, and Washington. Additionally, other states are considering legislation that would require some degree of pay transparency. These jurisdictions differ in their particular disclosure requirements, with some yet to take effect, but they all serve the same objective of promoting pay equity.

These changes come with significant consequences for employers, going beyond the obvious need to revise covered job postings in advance of the law’s effective date. Pay transparency, to some extent, will dictate the process by which an employer evaluates candidates for an open position. An employer in New York City will be unable, for example, to interview a candidate knowing that compensation is a wide-open issue, with the employer enjoying some degree of leverage if there is a negotiation. The employer loses some of that negotiating “high ground” by being forced to identify the compensation range up front. One view of this dynamic is that it will keep the focus on a candidate’s qualifications in making the ultimate hiring decision, because the compensation variable is limited, which should promote pay equity.

Another potential change comes from the fact that candidates will have more information about what pay is available for comparable positions with other employers in the market. Employers, therefore, should be prepared to explain the basis for whatever salary range they may identify. Though an explanation is not required, providing one if prompted could go a long way in securing desirable candidates in a competitive market. Furthermore, employers will need to work with any recruiting partners to confirm compliance in job postings and related communications to candidates.    

The overall trend toward pay transparency may be a signal that there is more to come on this front. Anticipating this issue, and how it could impact your operation, will be key to achieving future compliance. It is unclear the extent to which the COVID-19 pandemic could hasten or slow the momentum; however, for many employers, it has already resulted in an unprecedented need for skilled workers. In light of these challenges, even employers operating in jurisdictions that do not currently require pay transparency should evaluate whether pay transparency could benefit their operations and workforce.