October, 2022

Mandated Pay Transparency – the Public Posting of Salaries Being Offered – Is Imminent in NYC and CA

At the onset of the pandemic, when businesses were being shut down, new government edicts were materializing by the hour and it felt like the world had turned on its head, I heard from a great many clients, each trying in their own way to sort through the confusion. There was a level of chaos then that I hope never again to experience at quite that level in my professional career.

But I have advised and managed through other inflection points – times at which a jurisdiction (most typically NYC, thank you to my home stomping grounds) has rolled out a substantial change in employment laws that, while covered in advance by lots of law firms and journalists, still caught many employers by surprise. The advent of paid sick leave did that – with rules and guidance issued by the city literally at the eleventh hour before the effective date and employers that already had some form of paid sick leave benefit scratching their heads to discern how what they offered met (or more often did not meet) all that the new law required. And years before that it was the laws prohibiting smoking in the workplace – something that has now become a fairly standard workplace norm was radically shocking when it rolled out, with exceptions for private enclosed office spaces, signage mandates and a plethora of legislative compromises.

We are again at one of those inflection points, and this time the target is employer’s hiring practices. Next week New York City employers will face round one of the change, as November 1 brings with it a mandate that every job posting for a position that could be filled in the city (including by a remote worker) must specify the wage or job range for the position. That mandate takes effect in Westchester County on November 6 and for the entire state of California on January 1.

January 1 also will bring round two to New York City – a requirement that the myriad tools employers may now be deploying for their hiring practices undergo anti-bias testing and that those results, plus a plethora of other information, be made public on employers’ websites and through various notice requirements to job applicants. These requirements will cover the most basic of AI tools, like those that perform key word searches to help filter through (and reject) stacks of job applicants, to far more sophisticated systems that rate candidates’ suitability relative to designated hiring criteria or even conduct and analyze video interviews of prospective applicants.

One client recently commented that this is the full job security for recruiters law, and at least in the short-term it may be. New York City seems to place far greater faith in the unbiased (or at least more modestly scaled) feedback of recruiters and hiring managers than it does in technology that can be programmed to whittle applicant pools down to the choicest of candidates in the blink of an eye.

I have been writing and speaking of these legal changes for months and want to call out some of the resources you can reference for additional information.

  • For background on the basic elements of the pay transparency laws, see page 1 of Takeaways from Summer 2022. For similar background on the AI law, see page 5 of Takeaways from Winter 2021/22. And for the Westchester County piece of this, see my most recent posting on the WHRMA blog.
  • More in-depth articles that we have posted on each of these subjects for the Levy Employment Law blog include: NYC pay transparency law, NYC pay transparency guidance, AI tools, and pending NYS pay transparency legislation.
  • For some of the collateral consequences employers should be anticipating from pay transparency, see my Forbes interview with award-winning executive coach and author Dr. Ruth Gotian, and my more recent interview for the Employment Law column of SHRM, the Society for Human Resource Management.
  • For the broader context of how pay transparency aligns with the 50-year history of pay equity initiatives in the U.S., our firm delivered a continuing legal education program with the Federal Bar Association and MyLawCLE that can be accessed here.

And there are more articles to come, as we help our clients work through the practical applications and implications of these laws. I have been thinking through a range of options employers may wish to consider for their own organizations that get ahead of the pay transparency issue. Yes, a pay equity audit is a good start – as so many legal practitioners have been advising – because the first step in solving a problem is knowing whether one exists. But options and opportunities go well beyond that initial step.

Also, there is the nagging question of whether any of this new legislation actually is addressing the right problem. There is reason to believe it is not, but also options (albeit challenging ones) for how to truly get to the thorny underlying issues. Keep checking with me as we explore those ideas, and please consult employment counsel if you have any questions about how the new hiring laws apply to your organization.

By Tracey I. Levy


September, 2022

National Panel Recommends EEOC Collect Even More Employee Data as Solution to Inadequacies of Past Pay Data Collection

In 2017 and 2018, employers with 100 or more employees were required to participate in what was effectively a grand experiment.  In addition to filing an annual EEO-1 form with the Equal Employment Opportunity Commission (EEOC), which collects certain demographic data, broken into job categories, related to their workforces, they were required to report a plethora of additional data pertaining to employees’ wages.  This “Component 2” data was collected with the intent of enabling the EEOC to identify disparities and address inequities in pay based on sex and race/ethnicity.

A recent report from the panel tasked with analyzing the usefulness of the additional data the EEOC collected is concerning in what it found and what it recommends.  It found that much data was gathered, but it is of little use for the intended analytical purposes.   It recommends gathering massive amounts of additional data — effectively subjecting every employer to a detailed, annual or bi-annual pay equity audit — as a long-term solution.

How We Got to This Point

The initial collection of the Component 2 data was halted by the agency in 2017, with the change in presidential administrations.  A subsequent lawsuit filed by the National Women’s Law Center reinstated the regulatory requirement.  This led to employers belatedly reporting, beginning in 2019, Component 2 pay data for reporting years 2017 and 2018.

The EEOC then asked the National Academies of Sciences, Engineering, and Medicine to examine the quality of the data for its intended use and to provide recommendations for future data collections.  A panel of the National Academies reviewed the data to determine its usefulness in three contexts:

  1. 1. as an initial step in EEOC’s assessment of individual charges;
  2. 2. to examine pay differences at the national level; and
  3. 3. to assist with employer self-assessment.

The panel has issued a nearly 300-page report, which essentially found that, as executed, the 2017 and 2018 Component 2 data is of limited use in meeting any of the EEOC’s three objectives.

Viability as an Assessment Tool

Limits identified by the panel in terms of the scope and range of data collected suggest it is a poor tool for initial assessment of whether to file an EEOC charge against an employer, and an equally poor tool for employers to engage in their own self-assessments.  In particular, the panel noted the following flaws, which hinder pay equity analysis:

  • Only wage data was collected, not overall compensation;
  • Reporting is by pay bands, which is less useful than individual-level pay data, especially for discerning anomalies among small employers and in the highest and lowest paying occupations;
  • Pay data is broken down into reporting for 10 job categories used by the EEOC for EEO-1 reports, but those categories are outdated and overly broad for purposes of making effective comparisons;
  • Hours worked data was not helpful.  It required extensive cleaning, more than was possible for the panel to complete for purposes of its report.  Also the hours worked did not delineate full-time, part-time and seasonal employees, or when employees were on paid leave, all of which affect the calculation of annualized pay;
  • Data was overly generalized demographically, notably with only a binary designation for gender and with delineations that combine race and ethnicity into a single list, allowing no separate designation for those of Hispanic or Latino national origin who identify as white.   Also, to the extent there are additional protected characteristics (pregnancy, age, disability, and veteran status) that fall within the EEOC’s enforcement remit, no data was collected for evaluation; and
  • Data did not reflect education, tenure, performance or other legitimate causes of pay differences, which the report noted “diminishes the robustness of data” for purposes of initial EEOC investigations.

The panel concluded that the data collected on the current Component 2 forms could be used to identify potential outliers, but only as an initial step to prioritize investigations and the allocation of resources.  In other words, it was better than nothing, but not very helpful in actually determining whether employees are being paid disparately for discriminatory reasons.

Viability to Examine National Pay Differences

The panel also noted several flaws in the quality of the data that limit its viability for examining pay differences at the national level.  Employers with fewer than 50 employees could opt out from the data reporting and many did.  Other smaller employers provided a more summary version of the data, known as “Type 6” (as was permitted under the EEOC’s regulations).  Type 6 reports listed salary data based on the total number of employees, without specifying sex, race/ethnicity, occupation or pay bands.  The panel found the resulting product so unhelpful that it excluded all “Type 6” data from its analysis.

Further flaws included numerous reporting errors, so much so that the panel excluded from its analysis more than one-third of the data provided.  In addition, the proportion of reporting establishments for 2017 that could not be aligned to reporting establishments for 2018 was statistically much greater than Census Bureau data on the proportion of establishments that had opened or closed in that time period.  The panel concluded part of the problem were inconsistencies in the identification numbers that establishments used on their reports, which hindered matching.  Also, professional employer organizations (PEOs) that were reporting for multiple, otherwise unrelated client entities, sometimes submitted the reports under the identification codes and industry categories applicable to the PEO itself, instead of breaking down the data to align with the codes and categories for their various clients.

The panel concluded that, once reviewed and cleaned up (which it repeatedly referenced as a necessary step), the reported data could be used to estimate raw pay gaps at the national level by sex, race/ethnicity and job category.  Here, too, the data collected thus fell short of achieving desired objectives.

Short-Term Recommendations

The panel proffered a series of recommendations for improvements that could be made in the short-term to maximize the efficacy of the data being collected.  These recommendations included:

  • Better outreach to enhance compliance;
  • Use of statistical weighting of data for analysis and reporting on a national or sub-national basis;
  • Combining the components of the EEO-1 reporting into a single data-collection instrument with a standard reporting period;
  • Carefully reviewing and cleaning the data before assessment;
  • Eliminating reporting for employers with less than 50 employees, but continuing to require multi-establishment firms to file a consolidated firm-level report that includes entities with fewer than 50 employees;
  • Requiring PEOs to submit data separately for each firm they represent, using the client firm’s industry code;
  • Allowing a method for employers to download and review responses before submission for quality control;
  • Collecting W-2 box 5 total compensation data, instead of box 1 wage data;
  • Adopting narrower pay bands, with more pay bands for top earners; and
  • Allowing a demographic category for individuals with more than one race and finding measures that recognize gender as non-binary.

Before any revisions are made to the form, the panel cautioned that field tests be conducted to assess the burden, data availability and questionnaire design.

Creating More Robust Data Collection

The panel suggested that, in the longer term, the EEOC can more effectively achieve its stated objectives if it reconsiders its current approach to data collection and implements substantial changes to its measures.  Rather than directing employers to aggregate their employee data into what it described as “legacy” aggregated job categories, the panel recommended a series of changes that would essentially amount to a pay equity audit of every covered employer.

This would be achieved through four key changes.  First, job categories would be delineated using the more detailed Standard Occupational Classification system for classifying occupations.  Second, individualized data would be distinguished based on status:

  • exempt and non-exempt;
  • part-time and full-time; and
  • seasonal or year-round,

with hours worked collected only for non-exempt employees.  Third, employers would be required to report individual-level data relevant to pay disparity analyses, including:

  • education;
  • job experience; and
  • tenure.

Fourth, the range of demographic data would be expanded to include age,  disability and veteran status.

Tackling Pay Inequities

The panel is correct that, were the EEOC to adopt most or all of the panel’s four recommended actions, it likely would have the data necessary to achieve its objectives of identifying which employers to target for enforcement actions and could examine pay differences on a national level.  But at what cost?

The panel theorized that the administrative burden of more individualized data reporting might prove to be less than that posed by the current EEOC job categories, because the EEOC’s categories do not align to any other government or employer reporting system.  While potentially saving employers one step, though, the panel’s suggestions would add numerous additional data fields, many of which are not currently tracked in a meaningful way by employers’ information reporting systems.  Recognizing that possibility, the panel suggested that bi-annual reporting might suffice and it stressed that any additional data reporting requirements should be field tested before they are adopted.

Beyond the administrative burden to employers, it is questionable whether the EEOC remotely has the capacity to massage all that raw data into a meaningful analysis.  Having lots of information is not helpful if you are not able to pull it together and extrapolate from it.

Most significant is the data privacy concern.  How do we as a society feel about providing the federal government with individualized data on the total compensation of each employee, together with their demographic data, performance ratings, skills and experience, tenure and other factors?  Even anonymized, the data gets to a level where some individuals will be identifiable.

More alarming still, the panel’s final recommendation was that, while protecting for confidentiality, the EEOC should strengthen its data sharing with the public and other government agencies.  So employers would not only be entrusting all this data to the EEOC, but should expect it would be shared with other government agencies, advocacy organizations of various sorts, and the general public.

Final Worrisome Thoughts

Currently pending before the Office of Federal Contract Compliance Programs (OFCCP) is a broad request under the Freedom of Information Act for all Component 2 EEO-1 reports filed by federal contractors from 2016 to 2020.  As there are a great many federal contractors, the OFCCP responded to this request by posting a notice in the Federal Register on August 18 and granting employers exactly one month to object to their data submission being released.  No individualized notice is being provided to potentially impacted employers, few of whom likely monitor that which is posted in the Federal Register.

The OFCCP’s handling of the currently pending FOIA request for Component 2 data does not bode well for employers or for employee data privacy, were the EEOC to broaden the pool of data that it collects.  Grounded in current, demonstrated government actions, employers and employees have reason for concern.

The objective of achieving employee pay equity is laudable, but the approach of providing massive quantities of data to the EEOC for purposes of analysis and enforcement is fraught.  Employers should watch for further action by the EEOC in response to the panel’s report.

By Tracey I. Levy


January, 2022

Persistent Pay Inequity Drives Legal Mandates for Employers to Publicly Post Wages Being Offered

By Tracey I. Levy and Alexandra Lapes

Five or six years ago, in speaking with a start-up client about social media policies and wage transparency, the client explained they made available to all on their intranet a spreadsheet with salary information for the company’s entire management team.  While that practice remains extraordinary even in 2022, a new report from The Conference Board and Emsi Burning Glass highlights a growing trend toward greater wage transparency.  Among the key findings from Emsi Burning Glass’s analysis of job openings reportedly posted on nearly 40,000 separate sources, including job portals and employers’ career sites, was that:

  • more than 12 percent of all such postings in fall 2021 included salary data; and
  • nearly 16 percent of all noncollege occupations in fall 2021 included salary data.

That is about a 65 percent increase in wage transparency in just 2 ½ years – since April 2019.

The Conference Board/Emsi Burning Glass report attributes much of the increase to the current competitive labor market, where wage transparency is just one of numerous proactive steps that organizations are taking to attract applicants.  State and local legislatures – notably including New York City and Connecticut – will be further fueling that trend, as new laws take effect that require wage range disclosures in the hiring process.

Pre-Existing Landscape of Wage Transparency Laws

The earliest of these laws date back to California in 2018.  The California version, as well as those passed in the subsequent two years in Washington, Maryland, and Toledo and Cincinnati, Ohio, require an employer to disclose the wage range for a position upon the applicant’s request.  Colorado took transparency to a new level in 2021, and it requires private employers to affirmatively state the wage rate or range with any job posting for a position to be performed in Colorado or remotely from another location.  Connecticut and New York City have taken Colorado’s lead, with new wage transparency laws passed just in the last seven months.

Disclosing Wage Range for Connecticut Job Postings

Effective as of October 1, 2021, Connecticut employers must provide job applicants with the wage range for the position to which the applicant is applying, even if the applicant does not inquire.  The law states that this information must be disclosed either when requested or, if no request is made, then no later than the time a job offer is made.   Connecticut further requires employers to provide this type of wage range information to current employees:

  • who change positions with the employer; or
  • at an employee’s first request.

The “wage range” to be disclosed is defined as the range of wages an employer anticipates relying on when setting wages for a position, and may include reference to:

  • any applicable pay scale;
  • a previously determined range of wages for the position;
  • the actual range of wages for those employees currently holding comparable positions; or
  • the employer’s budgeted amount for the position.

Notably, recent guidance issued by the Connecticut Labor Department clarified that the law extends to anyone who applies for a job with a Connecticut employer, even if the employee is working remotely from another state.

NYC Requires Similar Disclosure, with Less Guidance

Beginning May 14, 2022, New York City employers with at least four employees (inclusive of contractors and employed family members), may not post job listings without stating the minimum and maximum salary for the position.   Failing to include this wage range information is deemed an unlawful discriminatory practice, and the requirement extends beyond job advertisements to posted promotion and transfer opportunities.  The law states only that the wage range may include the lowest to the highest salary the employer believes in good faith at the time of the posting it would pay for the advertised job, promotion or transfer opportunity.  We anticipate that, closer to the effective date, the city will provide additional guidance regarding the appropriate measure of the wage range.

A Growing Trend

Nevada and Rhode Island have similarly passed wage transparency laws in the past year.  Both states have staked a middle ground on when such information must be disclosed, but each prioritizes a different group.  Nevada requires that wage range information be automatically provided to each job applicant who is interviewed, but only given to employees if they request the information in the context of a promotion or transfer.   Rhode Island requires that wage range information be given to job applicants if they request it and prior to discussing compensation, but requires that employees automatically be provided the wage range at time of hire, when the employee moves into a new position, and whenever the employee requests it.

Similar legislation  is currently making its way through the committee review process in New York State.  As currently drafted it would mandate disclosure of the wage range both for the internal or external posting of each job opportunity, and upon an employee’s request.  A bill pending in Massachusetts would take the more modest approach of requiring disclosure only upon the applicant’s or employee’s request.  While we are not currently aware of any similar bills pending in New Jersey, the state has taken strong legislative action in the past several years to mandate pay equity, and we anticipate that a wage transparency bill may be forthcoming.

Reconciling Theory and Reality

The desire to counter pay inequity, which persists particularly for women, people of color, and those at the intersectionality of those two characteristics, drives this legislative mandate of wage range transparency, as stated in the preamble to many of these new laws.  The theory is that equipping workers with greater information will enable them to better negotiate their pay.

A recent article in Money magazine calls that theory into question, citing the experience of Buffer, a tech start-up.  Not unlike our client from five years ago (which was not Buffer), Buffer had gained some notoriety for publishing a public spreadsheet, beginning back in 2013, that included the salaries for its entire workforce.  According to the article, the company later began analyzing its pay practices and found a gender pay gap of 15 percent in 2019.  This is just slightly better than the 18 percent pay gap reported by the Bureau of Labor Statistics both in 2019 and 2020.  The article continues by noting that it was only through additional, affirmative measures taken by the company that Buffer said it was able to reduce the pay gap to 5.5 percent in 2021 – pay transparency alone, even over multiple years, had not made a difference.

Where that Leaves Employers in the Tri-State Area

Currently, employers in Connecticut have an existing obligation under the recent wage transparency law to update their job posting practices and include wage range information.  New York City employers must prepare for the May 14, 2022 effective date of the city’s pay transparency requirement.  Employers in the rest of New York State and in New Jersey should anticipate that they likely are just a few years away from having to meet similar requirements.

Moving beyond mere legal compliance, employers that are committed to pay equity should take a fresh look at their pay practices.  In the past, being a better negotiator or coming in with a higher base from a prior job were accepted explanations for differences in compensation among otherwise equally qualified employees with different protected characteristics.  The impetus behind the newest pay transparency laws suggests that there is less legislative acceptance of that explanation.  Consistent with the Emsi Burning Glass report, in this time of the “great resignation” and a ready flight of talent seeking better opportunities, employers may want to consider a different analysis and approach to their pay practices.

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