Tulane Law Online Virtual Speaker Series: Pay Transparency—Show Me the Money

Pay transparency is a hot topic amongst human resources (HR) professionals, and for good reason. California, Colorado, Connecticut, Maryland, Nevada, New York, Rhode Island and Washington have already passed pay transparency laws. And a number of states are currently considering pay transparency laws,¹ including Alaska, Georgia, Hawaii, Illinois, Kentucky, Maine, Massachusetts, Missouri, Montana, New Jersey, Oregon, South Dakota, Vermont, Virginia, West Virginia and Washington, D.C., in addition to numerous municipalities.² Congress has also been considering the passage of a national law, the Salary Transparency Act (H.R. 1599), which would amend the Fair Labor Standards Act to require employers to be more transparent about salaries. In this emerging landscape, HR professionals will be tasked (if they aren’t already) with leading the charge toward pay transparency compliance. To effectively address requirements, understanding the benefits, challenges and best practices to manage pay transparency at your organization is essential.

The Tulane Law Online Virtual Speaker Series addressed this important topic with a presentation entitled, “Pay Transparency: ‘Show Me the Money,’” which was led by two current students in Tulane’s online Master of Jurisprudence in Labor & Employment Law. Professor Saru Matambanadzo, senior director of Online Legal Education, hosted Jennel Ballestero, SHRM-CP and director of Human Resources at Weintraub Tobin, and Regina Lindsey, director of People Partnership and Talent Management at Teachable, as they explored this topic. Ballestero, who hails from California, and Lindsay, who is located in New York, have decades of experience in HR. Like many of the students in the Tulane MJ programs, they are leading professionals on the front lines, navigating pay transparency in states that have already passed legislation.

The Salary Transparency Act, if made into law, will amend the Fair Labor Standards Act and require all U.S. employers to provide the salary range for jobs in postings. The push for pay transparency is driven by a desire for fairness, accountability and a more inclusive work environment. Transparency is not a novel concept in employment law. There are currently protections for employees to share pay information among themselves in a transparent fashion already. Under the National Labor Relations Act, covered employees may freely discuss their pay in person and in written communications without retaliation.⁴ Engaging in discussions about pay and presenting joint-demands to employers about pay is concerted activity under the National Labor Relations Act for covered employees.

The push for pay transparency is driven by a desire for fairness, accountability and a more inclusive work environment. Ballestero explored these drivers during the presentation, including pay transparency vs. pay equity and the pay gap.

Ms. Ballestero defined key terms for understanding pay transparency. Ms. Ballestero explored these drivers during the presentation, including pay transparency vs. pay equity and the pay gap:

• Pay transparency is an employer practice of disclosing information about employee compensation standards to current employees, job applicants or both
• Pay equity is the concept that equal work deserves equal pay

Pay transparency and pay equity are different, but the ideas are linked—so much so that the Pay Transparency Act was introduced on Equal Pay Day, which was March 14, 2023.³

“I see pay transparency as a vehicle to pay equity,” said Ballestero. “And equity is the concept that equal work deserves equal pay. Equal work deserves equal pay no matter the person, their race, gender, identity or age. This concept goes back to one of the most fundamental and basic ideas of equality. If two people perform the same work, they should receive the same pay.”

While the Equal Pay Act of 1963 was supposed to prohibit gender-based wage discrimination, Ballestero noted that it has been notoriously unenforced. Pay transparency efforts can fill in where the Equal Pay Act may have failed, by helping move us closer to a world with pay equity, which in turn can improve fairness and inclusivity in the workplace.

Ballestero noted that the pay gap has narrowed over the years, but not by much. During the presentation, she shared the following statistics:

• In 2011, women earned 77 cents for every dollar a man made
• At present, women earn 83 cents for every dollar a man makes
• Black women earn 67 cents for every dollar a man earns
• Latinas earn 57 cents for every dollar a man makes

A big issue in the pay gap is a lack of knowledge. As Justice Ruth Beder Ginsburg noted in her dissent from the case Ledbetter v. Goodyear Tire and Rubber Company, individuals in the United States are notoriously secretive about their pay.⁵ Despite legal protections for discussing pay, often employees who are being underpaid in comparison to peers are unaware of the situation. They are often unable to negotiate because they are uncertain about what is even possible.

“Salary secrecy has contributed to the wage gap between men and women, and among different races, because female or minority employees are unaware of how much their male or white counterparts are earning,” Ballestero noted. “As a result, they can’t have meaningful negotiations for equal pay when discussing salaries as an applicant, or raises as an existing employee.”

Although pay secrecy policies, in which employers ask employees not to discuss pay, are illegal, lack of discussion in this area may have contributed to the pay gap. Transparency can vastly improve this issue.

In addition to driving pay equity and narrowing the pay gap, pay transparency brings several other benefits. For example, applicants will know what’s being offered when applying for a job, meaning they can avoid roles that don’t meet their salary requirements. Likewise, employers will save time and energy by interviewing candidates who are within the salary budget.

Other benefits include:

• Insight on what competitors are paying and where you organization fits into the market
• Building trust with candidates and current employees
• Younger workers are more likely to be transparent about their pay with others and attracting Gen Z workers will require increased commitments to transparency
• Retraining current employees as they know their experience and skills are valued
• Preventing attrition and the costs of employee turnover

There are, of course, challenges to pay transparency, particularly for HR professionals who feel some of the immediate impacts of any laws put into place. Pay compression is one such challenge. New employees may be paid as much as or more than a current employee due to market demand. With pay transparency, pay compression will become obvious to current employees, requiring the organization to find ways to address this issue and balance out pay.

In the emerging landscape where employer secrecy around pay will be more difficult to maintain, HR professionals should determine how to address pay compression before employees start calling it out. Lindsey noted, “Have a plan of how you’ll adjust or level any employees who have some disparities in their pay.”

Other challenges include:

• Overcoming the cultural taboo around talking about pay
• Training managers to effectively speak about pay
• Knowing if the policy actually solves what it is intended to solve
• Negative PR if your organization has lots of work to do
• Potential increases in discrimination claims

As pay transparency becomes more common, HR professionals will need to normalize conversations around pay and will be dealing with more administrative complexity. There is no one-size-fits-all solution to rolling out a pay transparency policy, but lessons can be learned from the professionals who live in states that currently have pay transparency laws in place.

Buy-in from executive leadership is going to be essential to successfully meeting pay transparency requirements. HR professionals will need to build a business case, noting the benefits to the bottom line. Not only are penalties for noncompliance steep—Ballestero noted that employers may be liable for civil penalties up to $10,000 per violation—but the cost of company culture and employee morale can be great if leaders fail to understand that pay transparency is not a fad.

“Ultimately leadership cares about the bottom line,” said Lindsey. “You really want to drive that home. And you don’t have to do the bare minimum. Doing more ultimately leads to more employee engagement and gives better brand recognition.”

Once you have executive buy-in, you will want to assess where your organization currently stands by conducting a pay audit. As organizations move toward pay transparency, the inequities may be glaring. Knowing where you stand will provide the path forward toward ensuring pay is fair and market-based. Armed with this knowledge, you can begin building out your pay bands.

Additional best practices include:

• Understanding your company’s pay philosophy
• Having transparent conversations with employees
• Documenting all pay decisions
• Planning ahead to determine how much a role will pay X amount of year into the job (this can help you determine the high end pay range for your job listings)

As you can see, pay transparency is a complex topic that requires HR professionals to go out of their comfort zones.

“Working with leaders to define pay philosophy and a communications strategy can be very nuanced and complex, and it requires a lot of leadership buy-in,” said Lindsey. “This requires you to be a pretty savvy HR professional to ensure you are illustrating and narrating how important this can be for the future of work and for the future of your workforce.”

Build your HR savvy and grow your confidence with Tulane’s online MJ in Labor and Employment Law program. As a Tulane Law student, you’ll master the complexities of employment law, gaining the legal foundation to meet federal, state, and local compliance regulations.

Learn more about Tulane Law’s world-class curriculum and make plans to meet with a member of the admissions team today.