To help promote pay equity, several states and local jurisdictions have passed pay transparency laws, which require employers to provide pay range information to applicants and employees. Employers who violate these laws may face agency investigations, lawsuits and civil penalties, as well as an obligation to correct any violation.
Understanding potential legal outcomes can help encourage pay transparency compliance and help employers prepare for potential challenges to their pay practices. We've compiled a list of four potential penalties below.
1. Agency investigations
Several jurisdictions have enlisted agencies to enforce pay transparency protections. Responding to agency investigations may require that an employer pay monetary damages, amend postings or engage in other affirmative relief to help avoid future violations.
New York City
The New York City Commission on Human Rights (NYCCHR) will investigate complaints alleging violations of the New York City pay transparency law. New York City's Law Enforcement Bureau also initiates investigations based on tips and other information sources.
Effective Sept. 17, 2023, a covered individual claiming a violation of the New York pay transparency law can file a complaint with the state's department of labor for an investigation and for a statement setting the appropriate remedy, if any.
An individual alleging a violation may file an administrative charge with the Division of Labor Standards and Statistics (DLSS) within one year of learning of the violation. The written complaint must state the name and address of the employer and a detailed account of the alleged violation.
A person aggrieved by the California pay transparency law can file a complaint with the California Labor Commissioner's Office. A written complaint should be filed within one year after the person learns of the violation.
Within four years of an alleged violation of the Washington pay transparency law, an employee or job applicant may file a complaint with the Washington State Department of Labor & Industries (L&I).
Like agency investigations, lawsuits related to pay transparency can jeopardize your reputation and cost you time and money.
New York City
In addition to filing a complaint with the NYCCHR, employees with a claim against their current employer can file an action in civil court.
The New York pay transparency law doesn't include a private right of action, which means an individual can't bring a lawsuit on their own to enforce their rights under the statute.
The Colorado pay transparency law doesn't include a private right of action.
An aggrieved person can bring a civil action for injunctive relief (relief that prohibits or requires specific actions) and any other relief the courts deem appropriate.
An employee may bring a civil action against an employer for actual damages; statutory damages equal to the actual damages or $5,000, whichever is greater; interest of one percent per month on all compensation owed; and costs and reasonable attorneys' fees. The court may also order reinstatement and injunctive relief. L&I cannot investigate a complaint if an employee brings a civil claim.
3. Corrective actions
Employers may need to review and revise their pay practices and postings to correct or eliminate violations of pay transparency laws.
New York City
Depending on the findings of an investigation, employers may have to amend advertisements and job postings, create and update policies, conduct training and provide notices of rights to employees or applicants.
The New York pay transparency law doesn't mention an opportunity to correct first-time violations.
If the DLSS finds a violation, it may order the employer to remedy it or impose a fine (see the "Civil penalties" section).
In the case of a job posting violation, an employer may be required to demonstrate that all job postings for open positions have been updated to include pay scales.
L&I will generally attempt to resolve a complaint through conference and conciliation. This process aims to reach an acceptable resolution for the filing employee, the employer and the department, without issuing a citation and assessment notice to the employer. The employee or employer may choose not to participate, in which case the department will determine if a citation and assessment notice will be issued.
4. Civil penalties
In some cases, an agency may waive, reduce or choose not to impose civil penalties for pay transparency violations, such as when employers correct them within a specific timeframe.
New York City
The NYCCHR won't assess a civil penalty for a first violation if the employer proves it has corrected the violation within 30 days of receiving a notice from the NYCCHR. Otherwise, employers covered under the law may have to pay civil penalties of up to $250,000 for an uncorrected first violation and for any subsequent violations.
An employer in violation of pay transparency requirements may be subject to one or more civil penalties. Penalties can't exceed $1,000 for the first violation, $2,000 for the second and $3,000 for the third and subsequent violations.
If the DLSS finds a violation, it can impose fines ranging from $500 to $10,000 per violation. Under certain circumstances, the DLSS may waive or reduce certain fines.
The labor commissioner may order an employer to pay a civil penalty of no less than $500 and no more than $10,000 per violation. There is also the potential for Private Attorneys General Act (PAGA) penalties of between $100 and $500 per violation.
L&I can order payment of damages to the employee plus one percent interest per month on all compensation owed. It may also require the payment of a penalty to L&I of up to $500 for a first violation and up to $1,000 or 10 percent of damages (whichever is greater) for repeat violations, in addition to fees, interest, costs and other appropriate relief.
Understanding your obligations
Pay transparency laws are developing rapidly, so the information in this blog post may change. Check back for updates (bookmark this page), and always consult an attorney or compliance expert before acting.
"We recommend working with compliance and HR experts when responding to pay transparency laws," says Meryl Gutterman, senior counsel, ADP. "Whether you're required to provide compensation in job postings or upon request, you'll want to ensure your compensation structure is fair and based on accurate, validated data."
Visit our Pay Transparency Resource Center for additional information.
This blog post references the following:
- New York City Human Rights Law
- New York's Salary Range Disclosure Act
- Colorado's Equal Pay for Equal Work Act
- California Equal Pay Act
- Washington's Equal Pay and Opportunities Act
This article is intended to be used as a starting point in analyzing the consequences of violating pay transparency laws and is not a comprehensive resource. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.