August 16, 2018

Pay disparity laws continue to trend across North America

Lawmakers are ramping up their efforts to pass pay disparity laws of all types. This summer alone has seen pay disparity laws go into effect in four U.S. states and two counties. Here, Compliance Counsel Emerson Beishline discusses the latest updates, and what they mean for employers.

Since I last wrote on this topic in April, pay disparity initiatives have gone into effect in six U.S. jurisdictions, and three U.S. states have passed new pay disparity laws.

Each jurisdiction passing these laws uses one or more of three typical approaches to decrease pay disparities between employees:

The first approach prohibits employers from paying employees differently based on gender and/or some other protected characteristics for similar work.

The second approach bans employers from inquiring about an applicant’s salary history with the idea that past salaries often inform future salary offers.

The third approach bans employers from retaliating against employees who choose to discuss their wages with their coworkers.

What has happened so far?

A number of state/provincial and local U.S. jurisdictions have had pay equity or wage transparency laws on the books for many years. Nevertheless, lawmakers have recently ramped up efforts to pass pay disparity laws of all types, especially laws banning salary history inquiries. To date, seven states plus Ontario, Puerto Rico, and five U.S. cities/counties have recently passed salary history inquiry bans.

So far, pay disparity laws have gone into effect in four states and two counties this summer alone. A Washington State pay equity law prohibiting employers from basing compensation decisions on an employee’s gender went into effect on June 7, 2018. Massachusetts and New Jersey incorporated wage transparency requirements into laws that went into effect on July 1, 2018. Salary history question bans went into effect in early July 2018 in Vermont, Massachusetts, San Francisco, CA, and Westchester County, NY.

What happens next?

California, Connecticut, Hawaii, and Ontario have all recently passed pay disparity laws that will go into effect on Jan. 1, 2019.

California’s salary history inquiry law clarifies an existing salary history inquiry law. Connecticut’s pay disparity law prohibits salary history inquiries except in limited circumstances. Wrapped into Hawaii’s standard salary history inquiry law are some wage transparency requirements prohibiting employers from retaliating against employees who discuss their wages with their coworkers.

As described in a previous Ceridian blog post, Ontario’s pay transparency law prohibits employers from seeking compensation history about an applicant but goes further than similar U.S. laws by requiring employers to: (1) include the expected compensation or range for the position in any publicly advertised job posting, and (2) complete an annual pay transparency report that must also be published.

At this point, most U.S. states are no longer in session and we are not aware of any proposed pay disparity laws that are likely to pass this year. In its 2018 Budget Plan, the Canadian federal government promised new federal pay equity legislation. However, this proposed legislation has yet to pass.

Notwithstanding our expectation of a relatively quiet year-end, we anticipate that pay disparity laws in states, provinces, and local jurisdictions in the U.S. will continue to evolve in 2019 and beyond. Stay tuned for those updates.

Learn more about how HCM tools provide insights into pay gaps, and help organizations manage compliance.

What does this mean for employers?

As mentioned in my previous post, employers may wish to carefully monitor existing and proposed pay equity laws in the jurisdictions in which they operate because many jurisdictions impose serious penalties for violations. Conducting appropriate job classification can also be challenging.

Compliance with pay disparity laws is complicated by the fact that state/provincial and local U.S. governments each have different, often layered pay disparity requirements. Case law in some jurisdictions further complicates the landscape. Employers with employees across many states/provinces and U.S. localities may want to consider establishing uniform policies around pay equity, salary history inquiries, and wage transparency to avoid inadvertently breaking the law. 

There are several measures employers may want to consider taking to comply with and stay ahead of pay disparity legislation in the U.S. and Canada:

  • Remove salary history questions from all job application forms.
  • Avoid asking salary history questions in interviews.
  • Write detailed job descriptions so that seemingly similar jobs are appropriately differentiated.
  • Regularly conduct a good-faith pay disparity self-evaluation that analyzes employee compensation across protected characteristics. These self-evaluations can act as an affirmative defense in some jurisdictions. However, employers who want to avail themselves of the affirmative defense may need to show reasonable progress toward eliminating any impermissible wage differentials discovered in a self-evaluation.

Learn more from our compliance team about trending compliance and legislation topics at INSIGHTS 2018.

Disclaimer: The information provided in this post is provided for informational purposes only and should not be relied upon or construed as legal advice and does not create an attorney-client relationship. You should review with your legal advisors how the laws identified in this post may apply to your specific situation.

Emerson Beishline

Emerson is Compliance Counsel at Ceridian with many years of experience in U.S. and international legal research and writing. In his current role, Emerson tracks U.S. and international employment legislation impacting Ceridian products, works closely with development teams to integrate compliance changes into the company’s Dayforce HCM software, and conducts legal research as needed. 

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