NYC Salary Transparency Law Takes Effect November 1, 2022: What Employers Need to Know and 4 Steps to Take Before Then
With New York City’s salary range transparency law’s effective date quickly approaching, employers need to familiarize themselves with its requirements and ought to take four crucial steps before November 1, 2022. In sum, the new law requires New York City employers that advertise jobs to include a good faith salary range for every open position, promotion, and transfer opportunity that is advertised.
This legislation, along with similar laws in several other jurisdictions (California, Colorado, Connecticut, Maryland, Nevada, Rhode Island and Washington), aims to combat systemic discrimination in the pay gap of women and people of color. This is a growing trend and more and more states and localities are poised to pass laws, including New York State, where the senate bill passed in September 2022 and is currently awaiting Governor Hochul’s signature.
We previously wrote about the challenges and ambiguities of the legislation, as well as the amendments made which delayed the effective date to November 1st (see here and here). Please note that some, but not all, of the ambiguities have since been addressed in the guidance issued by the New York City Commission of Human Rights, the agency responsible for enforcing the pay transparency law.
The biggest challenge for employers related to New York City’s new pay transparency law may be addressing the impact, and minimizing any disruption, that the disclosure of this information may have on existing and past employees. Perhaps for the first time, employees may be able to see what the employer is willing to pay for their current or former position. In situations where the range is less than what the employee is earning, they may make inquiries or lodge complaints. Because the transparency law is part of the NYCHRL, the statute of limitations is three years, which means employees who believe they were underpaid at any time during the past three years may bring a claim for discrimination. This Note provides suggested steps to take to fend off litigation.
What Employers Need to Know
Is your Business Covered by this Law?
As an amendment to the NYC Human Rights Law (NYCHRL)the pay transparency law applies to any employer with four or more employees, inclusive of owners and individual employers within the “four employee” count. Notably, the four employees do not need to work in the same location, nor do they all even need to work in New York City. If only one of the employer’s employees works in New York City, the law applies.
Employment Agencies are also covered by the new law, regardless of their size, eliminating the possibility of using an agency to evade the law’s disclosure requirements. The law does not apply to temporary staffing firms seeking applicants to join their pool of available workers. Temporary staffing firms are businesses that recruit, hire, and assign their own employees to perform work or services for other organizations, to augment the other organization’s workforce, or to provide assistance in special work situations, such as a particular project.
What if the Position Advertised is or May be Remote?
The initial version of the law was limited to “any position located within New York City” but that was removed in the subsequent amendments. Additionally, guidance from the New York City Commission on Human Rights, the agency that enforces the NYCHRL, states that “[c]overed 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.” https://www1.nyc.gov/assets/cchr/downloads/pdf/publications/Salary-Transparency-Factsheet.pdf (emphasis added). Thus, it seems apparent that the City Commission on Human Rights intends this law to have very broad reach.
What is an “Advertisement?”
The NYCHRL Guidance provides that an “advertisement” “is a written description of an available job, promotion, or transfer opportunity that is publicized to a pool of potential applicants. Such advertisements are covered regardless of the medium in which they are disseminated.” https://www1.nyc.gov/assets/cchr/downloads/pdf/publications/Salary-Transparency-Factsheet.pdf. Thus, it includes listings on internal bulletin boards or company intranet systems, internet and social media advertisements, as well as any printed advertisement, printed flyers distributed at job fairs, and newspaper advertisements.
Must NYC Employers Use Advertisements?
No. Employers are permitted to hire and interview candidates without posting any kind of advertisement. The law does not prohibit employers from hiring without using an advertisement or require employers to create an advertisement in order to hire.
What Must be Included?
In job advertisements, employers must include the salary range (minimum to maximum) that they believe in “good faith”, or honestly believe, is the range they are willing to pay a successful candidate, at the time of posting. The range cannot be open ended, so a minimum and a maximum number must be stated unless there is no flexibility regarding the compensation. For example, “$15 per hour” is permissible when the employer has a fixed rate, but “$15 per hour and up” is not because that is open ended and does not specify a maximum. A salary range is the only detail that is required. Benefits or other forms of compensation, including commissions and bonuses, for example, need not be included on the posting should an employer choose not to.
About Remote Work
With widely distributed workforces these days, assessing whether NYC’s law applies is not so simple. Likewise, the same employer may be subject to more than one pay disclosure law and some jurisdictions may require that even more information be disclosed. Employers may consider complying with the most employee-protective law for administrative convenience to ensure that all bases are covered, which, currently is Colorado law (requiring employers to disclose not only the pay range but also benefits, and to notify current employees of any promotional openings). However, with so much pending legislation nationwide, employers will need to continue to monitor their compliance in the event that a law with broader disclosure requirements applies.
4 Steps to Take Now
- Review and Update Postings and Advertisements. Ensuring that new postings or advertisements comply with the law is relatively straightforward. Employers would be advised, however, to provide extra lead time to determine and possibly get approval for the salary ranges to make sure accurate and consistent ranges are listed.
- Review Compensation of the Current Workforce. Employers should assess and analyze the compensation of each position, including bands or brackets. This process may reveal “pay compression”, or a circumstance where there is little difference in compensation among employees at varying levels of experience and tenure. Employers may also uncover discrepancies along gender or other possibly discriminatory lines.
- Document Reasons or Make Adjustments. If pay any disparities are uncovered, documenting the business reasons for such differences is prudent, including the factors on which the compensation decisions were based. For example, years of experience, level of education, starting position, tenure with the company, negotiations, performance and other reasons may have led to different pay among the same or similar positions. Alternatively, employers may wish to adjust some employees’ compensation to make sure they are fair and equitable.
- Train Managers how to Address Compensation Questions and Complaints. Managers are unlikely to be advised of complaints by prospective candidates or applicants. Current employees, on the other hand, who see that the upper range for their position is more than what they are or had been earning are the more likely group to raise an issue or concern. They may not allege discrimination based on gender or any other basis, but if they do, or allude to it, managers must know to raise this matter to a designated point person (e.g., HR, Compliance, Legal). It is critical that the point person receives all of the information and can respond appropriately to each, including, possibly conducting an investigation. Even if the employee simply alleges that their pay has been “unfair” or “should be changed”, managers are still well-advised to escalate the matter to an appropriate point person. Managing the fallout of disgruntled employees may ward bigger problems such as low morale, poor productivity, and chronic absenteeism or tardiness. Employers need to prepare for difficult conversations, and how to investigate and address complaints while being extremely cautious about not retaliating.
Thank you to Saadia Islam, law clerk, for her assistance with this article.
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