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Salary Transparency Law Could Be a “Game Changer” for New York City Employers

Lost in Translation: When “Salary” Doesn’t Mean What You Think it Means Background Decorative Image

Beginning on May 15, 2022, New York City employers with more than four employees must state the minimum and maximum salary whenever they “advertise” a job, promotion, or transfer opportunity. While the law does not define what it means to “advertise,” the New York City Commission on Human Rights (“NYCHR”) has issued guidance stating that an “advertisement” can be any communication about a job that is intended to be publicized to any pool of applicants and that will be performed, in whole or in part, in New York City, whether in the office or remotely.

There is little doubt that this law will apply to all new hires. With respect to promotions and transfers, however, there are some scenarios where the law might not apply. For example, when an employee is promoted into a new position as part of a natural career progression (e.g., “Engineer” to “Senior Engineer”), an employer would have a good argument that the job was not “advertised.” However, in any situation where the promotion could potentially be competitive — even though the employer may have a clear candidate in mind — employers would be well-advised to provide the salary information for the position.

An employer must provide both a minimum and maximum salary (or minimum and maximum hourly rates) that the employer in “good faith” believes it would pay for the job at the time of posting. However, as the NYCHR has clarified, “salary” only includes the base wage or rate of pay; therefore, employers do not need to include the cost of benefits or other forms of compensation, such as commissions, tips, bonuses, or stock, in order to comply with the new law’s requirements.

These new requirements could prove challenging to employers who, in this tight job market, may be offering new hires salaries that exceed those of incumbent employees. Disclosure of the higher salaries offered to new hires could create morale problems or, worse, give rise to pay discrimination claims from employees who learn that they are being paid at the lower end of (or even below) the advertised scale for their job. Penalties for violations of the law can be stiff and can include civil penalties of up to $125,000 per violation, or $250,000 for a violation that is deemed willful.

Certain amendments to the new law have recently been proposed, including one that would exclude businesses with fewer than 15 employees and would exempt remote positions that are performed outside of New York City. If those amendments are enacted, the implementation of the law would be delayed until November 1. It also bears noting that New York City is not alone in requiring employers to disclose salaries in job advertisements — Colorado imposes similar disclosure obligations on employers who utilize job advertisements; several other states and municipalities require disclosures in response to employee requests; and other jurisdictions are considering similar laws. Ultimately, salary transparency laws have the potential to be a real game changer for employers, as such laws increase the bargaining power of both job applicants and current employees.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.