Navigating the patchwork of pay transparency laws

Since 2022, several states and a handful of local jurisdictions have enacted pay equity laws, creating a patchwork of laws with differing requirements and prohibitions. The growing trend of leveraging remote-work policies to attract and recruit talent nationally can make implementation of these laws challenging for all types of employers.

CPA firms that employ remote workforces, recruit nationally, open offices in new cities, or acquire practices in other jurisdictions may not be aware they are subject to pay transparency laws beyond the geographical confines of their physical presence. Pay transparency laws may require salary/wage disclosures, document-retention obligations, pay equity reporting, and other mandates related to compensating employees equitably irrespective of whether they are part of a protected class.

VARYING STATUTORY REQUIREMENTS

Historically, pay equity claims were primarily governed by the Equal Pay Act of 1963, P.L. 88-38, which prohibited discrimination in pay based on gender. However, due to the disparity in pay between minority and nonminority workers that perform the same type of work, some states and local jurisdictions have enacted pay transparency statutes requiring transparency in disclosing salaries for all employees, either publicly or upon request, and/or prohibiting inquiries into the wage/salary history of applicants. As of the date of this writing, pay transparency statutes have been enacted or passed in California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, New York, Rhode Island, Washington, and Washington, D. C., as well as local jurisdictions, including Jersey City, N.J.; Albany County, N.Y.; Ithaca, N. Y.; New York City; Westchester County, N.Y.; Cincinnati; and Toledo, Ohio.

The specific requirements of each statute vary. Some require disclosure of a pay range in job postings. Others require it be provided either before or after the first interview or upon the applicant’s request. Some statutes prohibit employers from requesting an applicant’s wage or salary history, while others prohibit employers from using wage or salary histories to screen applicants. In addition, thresholds related to employer size vary among the statutes.

Many of these statutes create a private right of action, meaning an applicant can bring a claim against an employer for failure to comply with the law. Others can be enforced only by governmental agencies. In any event, an employer’s failure to comply can result in significant civil penalties and fines.

Many of these laws apply even if the employer does not have a physical location in the jurisdiction. Some statutes apply if there are a certain number of employees located within the state, and others apply if an applicant could be located in the state or jurisdiction.

Plaintiffs’ attorneys are likely to jump on the potpourri of protections afforded by the various state and local pay transparency statutes. With different requirements for how and when to comply and firms expanding beyond their geographic borders, plaintiffs and their attorneys may capitalize on a firm’s failure to comply with all applicable laws, enabling multiple claims to be made related to a single job posting.

TIPS TO AID WITH COMPLIANCE AND AVOID ADDITIONAL RISKS

How can employers mitigate risk related to noncompliance? It’s crucial to be proactive and do the following:

Understand applicable laws

When evaluating the applicability of pay transparency statutes, CPA firms should look beyond where their physical offices are located and see where their employees and applicant pools are located. Firms should consider whether having a national recruitment policy requires postings to comply with certain state or local statutes, as potential applicants may reside in those jurisdictions.

It is recommended to seek guidance from an employment practices attorney to determine all applicable pay transparency laws and their specific requirements.

Once you know which law(s) apply to your practice, you will need to understand what is required by the applicable law(s) and create policies and procedures to ensure compliance with their specific requirements. Changes may be necessary. For example, a Maryland-based firm seeking to open an office in New York would need to comply with New York fs pay transparency law, which requires certain employers to include a salary range with advertised positions. This differs from Maryland fs law, which requires employers to provide wage range information to applicants who request such disclosure.

Determine an approach to compliance

Firms located in jurisdictions with pay transparency statutes . Or subject to such jurisdictions based on the location of their employees or recruiting strategy . Should ensure their recruitment and hiring policies and procedures comply with all applicable statutes.

With pay transparency laws becoming a nationwide trend, CPA firms across the country should proactively identify and address pay equity issues that may be brought to light, by reviewing and evaluating employee compensation for potential disparities and addressing any disparities before disclosing pay ranges. Firms should also consider creating and publishing compensation policies so employees can understand why they may be paid differently before they jump to the conclusion that it is due to discriminatory practices.

Conduct a pay equity analysis

If your firm is subject to a pay equity statute(s), consider evaluating the pay ranges for all current positions. If legal counsel is engaged to conduct a pay equity analysis, the work will be protected by attorney-client privilege. If needed, making modifications to existing compensation ranges should be seriously considered. If pay disparities among employees exist, they should be addressed. Similarly, if a firm tries to attract talent by increasing the salary range when recruiting and must disclose the new salary range under a pay transparency statute, then existing employees will see the salary range and where their salary falls in the range. If a current employee sees a job posting with a pay range and their pay is below or on the lower end of the pay scale, the employee may assume they are paid less due to their gender or some other protected characteristic. Then, the firm may have to justify the pay differential under pay discrimination laws. Addressing these issues proactively before pay disclosures bring them to light could prevent costly pay discrimination claims.

Train those involved with recruitment and employee management

Employers should likewise consider training for hiring managers, talent acquisition, and other human resource professionals to ensure they have processes in place to comply with the patchwork of laws in applicable jurisdictions. Policies and procedures should address when the disclosure must be made, what must be included in the disclosure, what documents are required to be retained, whether wage/salary history can be requested, and whether pay equity reporting is required. The procedures should also detail a process for ensuring the compensation information included in all job postings is current, accurate, and satisfies the requirements under all applicable pay transparency laws. If third parties are utilized during the recruitment process, confirm whether they have processes in place to help ensure compliance with applicable statutes.

STAY UP TO DATE

As the nationwide pay equity trend continues with proposed pay transparency laws in a number of states and local jurisdictions, consider consulting an employment practices attorney annually to stay abreast of any new statutes that may apply and ensure your firm complies with the same. It pays to stay in compliance.

Pay gap

83.7 cents: The amount women who work full time were paid on average in 2023 for every dollar earned by men.

Source: U.S. Department of Labor.

Nicole Lazarz Graham, Esq., is a risk consultant at Aon, the administrator of the AICPA Professional Liability Insurance Program since 1967. For more information about this article, contact specialtyriskcontrol@cna.com.

This article is provided for general information purposes only and is not providing individual guidance on legal requirements or potential exposures. You should consult with your professional advisers before taking any action discussed in this article. While care has been taken in the production of this article and the information contained within it has been obtained from sources that Aon believes to be reliable, Aon does not warrant, represent, or guarantee that accuracy, adequacy, completeness, or fitness for any purpose of the information or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Recipients are responsible for the use to which they use this document.

You should consult with your professional advisers before taking any action discussed in this article. While care has been taken in the production of this article and the information contained within it has been obtained from sources that Aon believes to be reliable, Aon does not warrant, represent, or guarantee that accuracy, adequacy, completeness, or fitness for any purpose of the information or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Recipients are responsible for the use to which they use this document.