Are Strict Pay Transparency Laws Dampening Remote Work Options?
Colorado, a pioneer in pay transparency laws, has seen listings for remote jobs decrease by 25% in the past month
Key Insights:
- Colorado, where recruiters are required to list a pay range in the job advertisement, has seen recent listings for remote jobs drop by 25%, five times the national average decrease of 5%.
- However, recent listings for non-remote positions in the state are steady, even as the national average number of non-remote listings has dropped 12% over the past 30 days.
- Remote listings are now explicitly writing that Colorado residents are not eligible to apply rather than list pay ranges.
- Since the pandemic shake-up of the economy, more local and state policymakers have passed laws to ensure various levels of pay transparency, which job seekers have long demanded.
- New York City, as well as California and Washington, now join Colorado in requiring companies with employees in their jurisdiction to post pay ranges in advertisements.
- Other states’ pay transparency laws require the applicant to inquire about the pay range or to pass an initial interview.
The move towards remote work has been one of the defining economic trends of the pandemic. Some of the biggest beneficiaries of this shift were those working in higher-paying, white-collar jobs.
Though many companies are trying to lure employees back to the office now, employers have also benefited from the shift to remote work.
When working in an office is a prerequisite, employers’ hiring choices are limited to those who can commute to the office or are willing to relocate. When remote work is an option, an employer can recruit nationwide to find the ideal applicant, regardless of their location.
Well, almost nationwide.
With so many areas to recruit in, employers hiring for remote jobs can choose to avoid jurisdictions whose laws force them to change their hiring process by requiring recruiters to list the pay range for all jobs.
For a year now, any company with four or more employees in Colorado has been required to list the salary range for all of its advertised jobs. For that reason, some recruiters have steered clear of the state. In fact, many remote advertisements include a simple but straightforward message: “This is a remote job except that it is not eligible to be performed in Colorado.”
Despite this, there appears to be momentum for pay transparency rules similar to Colorado’s law. New York City now makes it an “unlawful discriminatory practice” to post any job listing for a job to be performed in the city that does not include the minimum and maximum pay.
Proponents of pay transparency say it both streamlines the hiring process and allows for better analysis of inequities in hiring practices.
Colorado Data Show Remote Job Listings Plummeting, While On-Site Listings Hold Steady
Colorado is the largest jurisdiction with the kind of strict pro-employee pay transparency laws labor advocates would like to see. Even if a company has only one employee working in Colorado, they are required to post pay ranges for any jobs they advertise in or out of the state.
Though other states, like Washington, have passed similar laws, Colorado’s was the first to go into effect. While a number of cities have also followed suit, they offer smaller sample sizes.
This makes Colorado’s hiring environment, specifically the number of unique job listings recently posted, the best measure we have of how strict pay transparency laws affect remote hiring trends.
The yawning gap between Colorado’s job listings for remote and non-remote jobs shows that employers are not shunning Colorado entirely. They’re only shunning it for remote work.
In fact, Colorado’s non-remote jobs stayed stable over the 30 days surveyed, doing much better than the national average of non-remote job listings, which decreased by 12%.
Yet, when we look at Colorado’s remote job market, we see a precipitous drop of almost 25% in the number of remote job listings over 30 days. The national picture also shows a contraction in remote job listings on average, but nowhere near as sharp as what happened in Colorado.
This final data point suggests that something unique to Colorado — such as its pay transparency laws — is causing employers not to post for remote jobs in the state.
Changing Trends in Pay Transparency
Pay transparency is becoming more popular, especially at local and state levels. Since 2020, at least a dozen state and local jurisdictions have enacted pay transparency laws, or amended past labor laws to tighten pay transparency rules.
This momentum towards mandated pay transparency is part of the push for workers’ rights that has also accelerated since the pandemic.
Job seekers have long been tired of the opaque nature of most companies’ hiring process. It’s often unclear until the very end of the process what the pay range for a position is. And if the negotiation on a salary isn’t successful, both sides have lost out.
The job seeker has wasted time and energy writing a cover letter and preparing for rounds of interviews for a position they could have skipped over. Meanwhile, the company has wasted time and money in pursuit of a candidate they couldn’t afford, while other applicants were passed over.
The tighter labor market during much of the pandemic has given job seekers in some industries greater bargaining power. Many have taken advantage of that negotiating position to insist on more clarity around salary and other compensation earlier in the process.
This has also taken place during a period of greater labor activism, another factor pushing policymakers to consider more pro-worker laws.
Federal Laws
Federal laws are limited, but at the very least they prevent retaliation against employees who inquire about pay levels. But even this minimal protection includes exemptions.
There is an exemption for “essential job functions” and a general, or “workplace rule” exemption, according to the Department of Labor. These both provide employers with defenses against a charge of retaliation by an employee.
The essential job functions defense would allow inquiries, discussions, or disclosures of compensation information that employees obtain through their essential job duties. For example, discussions of compensation information by HR personnel may not be protected by federal law.
The general workplace rule exemption allows an employer to discipline employees under other workplace rules unrelated to discussing compensation. For example, if an employee regularly took extended breaks while discussing compensation, they can be disciplined for breaking a workplace rule against taking extra breaks. However, any disciplinary action must be the same as how the company would handle the issue if they weren’t discussing pay.
But this general exemption also allows companies to create rules, narrowly tailored to prohibiting the disclosure of specific proprietary business information or trade secrets. A company could use such a rule as a defense if it were ever accused of retaliating against an employee who inquired about pay.
States’ pay transparency laws:
Seven states have pay transparency laws on the books, though they vary in their scope and details.
- With its 2016 Equal Pay Act, California was the first state in the U.S. to legally require employers to provide the pay range for a job.
- However, the employer only has to provide the pay range if the candidate asks, and even then only after the first interview.
- The law also prevents employers from asking about candidates’ previous salaries, a practice which often works against minority and female applicants.
- It was the first law to use the phrase “substantially similar work” in regards to gender pay parity, referring to work that is mostly similar in skill, effort, responsibility, and performed under similar working conditions. This has since become a widely used legal framework in defining pay parity.
- In effect since January 2021, Colorado’s Equal Pay for Equal Work Act requires employers to list the pay range and benefits for every job opening.
- Even if a company has just one employee working in Colorado, it’s required to list the pay of any remote job that could potentially be performed in the state.
- The law also mandates that companies inform current employees of all promotion opportunities and keep records of job descriptions and wages.
- Connecticut’s House Bill 6380 was updated in 2022 to require employers to provide a salary range for all extended offers. Pay information must also be provided whenever a candidate asks for it.
- Employers in Connecticut have to provide a pay range for any instance where someone is moving into a new role, such as transfers or promotions.
- Maryland originally passed its Equal Pay for Equal Work Act in 2016, but updated it in 2020 with language that requires employers to provide pay ranges to candidates upon request.
- Employers in Maryland are also prohibited from asking candidates about their previous salary history.
- Senate Bill 293 requires Nevada employers to automatically provide a salary range to candidates after the first interview.
- For internal moves like transfers and promotions, the onus is on the employee to request a pay range.
- Introduced and passed in 2021, the Rhode Island Equal Pay Law will require employers to provide candidates with a pay range if the interviewee requests it — starting in January of 2023.
- This will apply to transfers and promotions as well.
- Either way, employers are legally required to disclose the salary range for a role at the pay negotiation stage of the hiring process.
- Not far behind California, Washington amended its Equal Pay and Opportunities Act in 2019 to require employers to provide a salary range after they’ve made an offer to a candidate.
- Initially, it required a request from the candidate or employee (in the case of transfers and promotions).
- The Washington law was amended in 2022 to say that the pay range must be posted in advertisements, instead of on request. The amended version will go into effect Jan. 1, 2023.
Local pay transparency laws:
New York City, NY
NYC’s pay transparency law requires posting the “lowest to the highest salary the employer in good faith believes at the time of the posting” it would pay for the job.
Ithaca, NY
Ithaca’s pay transparency law closely mirrors the New York City law. It covers employers with four or more employees in the city, and requires that pay ranges be posted on job listings.
Westchester County, NY
This New York City suburb has also passed a pay transparency law similar to the NYC law, requiring pay ranges to be posted on job listings.
Jersey City, NJ
Nearby Jersey City has followed NYC’s example, mandating employers with more than four employees to post in any listing “the lowest to the highest salary the employer in good faith believes at the time of the posting it would pay for the advertised job, promotion or transfer opportunity.”
Cincinnati, OH
Cincinnati, Ohio’s largest metropolitan area, has a more modest law. It prohibits employers with 15 or more employees in the city from inquiring about or using past salary information. The goal is to reduce pay inequities by basing compensation on the role and responsibilities, rather than an applicant's pay history.
Toledo, OH
Toledo has a law similar to Cincinnati's rule, prohibiting companies from inquiring about or using past salary information in hiring or compensation decisions.
What Do Changes in Pay Transparency Mean for Employers and Employees?
As Colorado’s job posting data shows, there does seem to be a link between an area having tight pay transparency laws and a drop in the number of remote job listings for that area. With remote jobs, companies can pick and choose from more employees across the country. This makes it less of a loss for them to exclude an entire state from their recruiting efforts so they can continue to keep the job’s expected pay range out of ads.
That is not the case for in-person jobs. If a factory in Colorado needs a foreman, they don’t have the luxury of not advertising in Colorado just because they would have to include pay information.
There are some reasons for businesses as a whole to prefer to guard their pay scales. It keeps job seekers and potential employees in the dark about compensation, giving employers an edge in negotiations. A more generous interpretation is that they don’t want to be excluded from candidates’ job searches just because of a pay range that may not capture all of the other forms of compensation the position offers.
However, this method of hiring and compensating has contributed to historic pay inequities between genders, races, and against other groups such as LGBTQ employees. It has also created an opaque and frustrating hiring process for job seekers.
As more jurisdictions mandate pay transparency, companies may want to get ahead of the curve and become more transparent voluntarily.
This would serve both as a way of differentiating themselves from competitors for talent, and to ensure the hiring process moves more smoothly, with the salary range acting as a filter.
Such changes in transparency should also apply to internal job applicants. This could help ensure a company’s present employees feel valued enough to deserve more honesty and openness between themselves and the company.
As Bloomberg Law puts it, “the risks of getting this wrong — especially during the Great Resignation — are enormous, given the direct link between pay transparency and employee retention. In the absence of having accurate ways of determining and reporting this information, companies will be at a competitive disadvantage and risk not staying in compliance.”
The process of setting ranges should be done deliberately and carefully, and should be regularly reevaluated. The pay range review process can even be designed to unearth gender or race pay disparities. To do so, employers need to constantly measure and assess pay gaps, and make other reforms as they come across problems.
This would allow a company to be proactive about fixing those inequities, further burnishing their image and attractiveness to potential applicants, while staying compliant across jurisdictions.