What New York employers can learn from the pay transparency law passed in Colorado

October 26, 2022, 10:00 AM UTC
New York City's pay transparency law goes into effect Nov. 1.
Aytac Unal—Anadolu Agency/Getty Images

New York is set to pass a spate of city and state laws mandating that employers list salary ranges on job postings. The New York City law will go into effect on Nov. 1, while the state bill, which the state legislature passed in June, is currently awaiting Gov. Kathy Hochul’s signature. As the 650,000 businesses that call New York home begin updating their hiring practices, they can turn to Colorado, which passed a similar law in January last year, as a blueprint. 

First, companies with significant pay gaps for the same title should prepare for backlash and a potential exodus of workers. Many Colorado employees realized they were severely underpaid when the pay transparency law was enacted.

“Some Colorado clients that we’ve been working with have been dealing with the backlash of what happens when you advertise a job for a different pay scale than your current employees are already making,” says Bradley Bartolomeo, an employment lawyer and partner at the law firm Lewis Brisbois. 

Bartolomeo is advising his New York clients to audit pay before the law goes into effect to better understand current salary bands and what salaries they’ll need to offer applicants to be competitive in the talent marketplace. The most effective audits are forward-looking, he says. Companies should determine how much they plan to pay for a role two years down the line and make that the high end of the listed pay range. They should also be transparent with current employees who make less than the listed high-end salary about what is required to obtain higher pay. Such criteria can be based on qualifications like experience, education, or performance once on the job.  

The New York and Colorado laws also stipulate that employers provide a “good faith” salary range, which Gibson Dunn partner Gabrielle Levin concedes hasn’t been adequately defined yet or adjudicated in court. But she cautions her clients to be honest about a position’s going rate to avoid violating the law.

It’s worth noting that New York’s law has implications for promotions, which qualify as job openings. “One of the challenges Colorado employers faced was how to advertise a promotion and why they would need to advertise a promotion if a current employee is filling it,” Bartolomeo says. New York companies will not have to post a job listing when employees are promoted in-role, such as from sales manager to senior sales manager. However, if an employer publicizes a written description of that role—even just on an internal job board—they must disclose the salary range.

Levin warns that the law may extend to informal postings soliciting applicants. For example, an employee who posts on LinkedIn that they’re looking to fill a software engineering role and doesn’t include a salary range may violate the law.

The law also applies to any job that can be reasonably done in New York, including remote jobs. Companies cannot circumvent the law by excluding New York residents from jobs. Cigna, Nike, and Airbnb were among the employers that attempted to do so in Colorado and were found to be in violation of the state’s law. After the Colorado Department of Labor and Employment cracked down on the practice, the number of job postings for remote positions that violated the law fell by 90%, a spokesperson said. 

States are implementing salary transparency laws to combat pay inequity. But because these laws apply to job openings rather than all jobs at a company, their impact on the wage gap won’t be immediately measurable, says Colorado employment attorney Justin Plaskov. “The more turnover that happens, the more jobs that are being posted, the greater impact it’ll have over time.”

Women earn approximately 73 cents for every dollar that white men earn, according to a National Women’s Law Center report from March. That number worsens for Black and Latina women, who earn 58 cents and 49 cents, respectively.

While the pay transparency law could be a valuable legislative effort to narrow gender and racial pay gaps—and disincentivize companies from offering significantly higher salaries to a select few—some argue that it is most effective when combined with other tools. “The best antidote to pay gaps within a workplace is a collective bargaining agreement,” a spokesperson for New York State Senator Jessica Ramos, who sponsored the bill, told Fortune. “But for those employees who are not represented in the workplace by a union, creating a system of transparency will make it easier to establish equal pay for equal work.”

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