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Businesses argue NYC’s groundbreaking new law to require salaries in job postings will hurt the local economy

February 1, 2022, 11:00 PM UTC

Employers in New York City will be required to include a salary range on all job postings beginning in May, a move that city representatives say will help fix persistent income inequality for women and minority workers

Business groups, however, are crying foul. They argue that the changes will be difficult to implement, give employees the upper hand in salary negotiations, and make New York City appear less business-friendly.

Salary transparency has been linked to fixing the gender pay gap in various studies. Research has also found that pay secrecy reinforces racial biases.

In New York City, women make about 89 cents for every dollar a man makes. The pay gap widens for women of color: Asian women are paid 82 cents, black women are paid 66 cents, and Latina women are paid 56 cents.

Pay-disclosure requirements have already been implemented in states like Rhode Island and Connecticut, but they haven’t always gone smoothly. For example, when a similar measure was passed in Colorado last year, Johnson & Johnson and commercial real estate giant CBRE Group created job postings saying that remote roles were closed to people in the state, allowing them to get around the law.

New York City, however, is a huge economic hub, home to the most Fortune 500 company headquarters in the country, making it more difficult for corporations to avoid. A labor shortage created by the pandemic has also boosted employee bargaining power.

The change in New York’s pay disclosure comes in an amendment to the city’s Human Rights Law, approved by the New York City Council late last year. It applies to employers with four or more workers, as well as individuals who employ one or more domestic workers.

Enforcement of the rule by New York’s City Commission on Human Rights begins May 15.

“Knowing a salary range before interviewing for a job helps an employee make an informed choice about whether they want to apply for a position, saving both the company and the applicant time if the salary range does not match the expectations of a potential applicant,” said Sapna V. Raj, Deputy Commissioner of the Law Enforcement Bureau of New York City’s Commission on Human Rights, told Fortune.

“Employees working hourly wage or entry level jobs are vital to the city’s economy and infrastructure and deserve to have the opportunity to know what to expect as far as compensation before accepting a job,” she said, adding that transparency also gives companies visibility into what competitors are paying.

Business groups like the Partnership for New York City, with member companies including JPMorgan Chase and IBM, oppose the new legislation, calling it vague and difficult to implement. 

“There was no opportunity to discuss the legislation with the City Council before voting and this is just too blunt a tool,” Kathryn Wylde, chief executive of the Partnership for New York City, told Fortune

The new law does not define what “advertise” means, nor does it differentiate between jobs that are posted externally versus internally, according to an analysis by law firm Gibson Dunn. It also fails to define what counts as a salary, leaving room for employers to try to circumvent the rules.

The enforcement mechanism behind the plan also worried Wylde, who said it would be complaint-based. “Does that mean someone who is not hired for a job can sue if the person who is hired makes more than the maximum in a stated salary range?” she asked. “Complaint-based legislation leads to litigation and that’s expensive for employers.”

The Commission on Human Rights told Fortune that it’s working on providing specifics about the new provisions, and that it will provide free training to employers about complying with the new rules. 

Not just anyone will be able to sue a company, Raj said. If a business is found to violate the law, the commission can file a complaint, which could result in civil penalties up to $250,000, damages for emotional distress to the injured party, and back pay.

Raj said the city won’t punish employers so long as they attempt, in good faith, to comply with the rule. Factors used when evaluating good faith will include “whether an employer posts consistent salary ranges for the same position, the breadth of the posted range, and the employer’s reasoning for selecting the specific range,” she said.

Wylde countered that it’s difficult to provide clear ranges for jobs for which bonuses can be several times higher than salaries. She instead has asked the city to endorse an Obama-era pay transparency executive order that​​ required large companies to report how much they pay workers by race and gender. The rule was overturned by the Trump administration. 

Employers aren’t against pay equity, said Wylde. “This is not a problem with hourly wage jobs and most lower and mid-level wage jobs,” she said. Her opposition has to do with “the jobs that drive our tax base in financial and professional services, media, and technology that aren’t compensated specifically by salary but also include equity and bonus performances components.” 

But Diana Burton, director of Cornell University’s Institute for Compensation Studies, sees disclosing benefits and equity as a positive. “Employers will now need to signal what they’re offering aside from pay,” she said. Advertising other forms of compensation like flexibility is savvy, she said, and a good way to recruit employees. “That’s a good thing, it further reduces information inequality,” Burton said.  

But when asked whether companies her organization represents support salary transparency, if implemented correctly, Wylde hedged. 

“I wouldn’t go that far,” she said. 

Companies aren’t looking at the law to create compensation equity across gender and race, said Burton. In their minds, this is about “employers versus workers.” It’s about which party has more information when negotiating a salary and which party is most vulnerable.

Still, it isn’t productive to make employees test the labor market just to ensure that they’re being paid fair wages, added Burton. It would be easier for everyone if salary information was more widely available, she said. No one would expect a potential homebuyer to tour a house before they knew the price range, why should they expect any different from a jobseeker?

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