What Employers Need to Know: DC's New Wage Transparency Law

What is the New Law?

Washington DC Mayor Muriel Bowser signed the District of Columbia Wage Transparency Omnibus Amendment Act of 2023 on January 12 of this year. Though this law is still pending Congressional Approval, it is expected to pass and go into effect June 30, 2024. This new law is aimed at reducing wage inequality within DC by requiring employers to disclose the minimum and maximum projected salary or hourly wage in all job listings and postings. The law additionally requires employers to post notice of the rights under this act in a conspicuous location, prevents employers from prohibiting employee discussion of compensation, and bans employers from retaliating against employees that do discuss compensation.

This new law is part of a wave of legislation being enacted in several states throughout the country. As of the date of this article, thirteen states have either already enacted a wage transparency law or are in the process of doing so.

What is the Point of the New Law?

Laws like these are aimed at reducing wage inequality. Wage inequality is a huge problem on a national scale. For example, according to a recent bloomberg article, ?nationally black women earn 67 cents to every dollar earned by a white man for full-time work. Part-time work comes with a greater gap of 64 cents to every dollar. While these national averages are disappointing enough, when you consider that the gap widens significantly when looking only at Washington DC it becomes clear why there was a need for new legislation. In DC black women can expect to earn 52 cents for every dollar earned by a white man when working full-time and only 41 cents on the dollar for part-time work.

The new DC law works to reduce wage inequality with a three-pronged approach.

1.???? Salary Transparency: First, by requiring employers to post the salary range in their job postings, employees have more information and are better able to negotiate their pay. For example, let's say a white man and a black woman apply for the same job. The posted salary range is listed as $95,000-$100,000. Even if the black woman accepts the lowest salary in the range and the white man accepts the highest range, instead of earning 67 cents to every dollar, she is now earning 95 cents to every dollar.

2.???? Prohibitions on Wage History: The second way in which the DC law acts to reduce inequality is by prohibiting employers from asking for an applicant’s wage history prior to hiring. At first blush it may not be clear how this reduces income inequality but consider the same applicants from before. In her previous position, the woman was paid $67,000 while the man was paid $100,000 in his previous position. If an employer knows this, the employer can exploit the woman’s previously underpaid status by continuing to underpay her. A salary offer of $80,000 would be a significant pay increase for her, even though it is much lower than the $95,000 the employer was expecting to pay. And on the other hand, the white man’s previous salary was $100,000. He may be willing to take a job paying the same amount as his previous salary, but the employer may feel the need to pay a little more than they were previously expecting to pay in order to secure this employee. Now the wage gap between the man and the woman is still quite large and neither party is aware of the inequity.

3.???? Employee Discussion of Compensation: The final way in which this law aims to reduce wage inequality is by preventing employers from prohibiting discussion of compensation by employees and by prohibiting retaliation by employers against employees who discuss compensation. As the saying goes, knowledge is power. The more employees are free to discuss compensation, the more leverage they have to ensure they are paid fairly.

What Do Employers Need to Know?

1.?? Which Employers Are Covered?

Employers with at least one employee are required to comply with the requirements of this new law. It is not clear how this law will apply to remote employers hiring employees in DC, remote employers located in DC hiring employees nationwide, DC employers hiring individuals from the metro area surrounding DC’s boundaries, or non-DC employees hiring for roles that may be filled by DC residents. To be safe, employers may choose to assume the law applies to them if the position could be filled in Washington, DC.

2.?? What must be in the job posting?

?Employers will need to include compensation information in their job postings and ads. The new law requires that employers provide a good faith estimate of the compensation they are prepared to provide for the role. The wider the range of expected compensation, the less helpful that information is. To comply with the requirements, it is important for employers to carefully consider exactly how much they are prepared to pay and to provide a range of compensation that is wide enough to cover the employer’s needs while being narrow enough to provide useful information to applicants. Because the law includes good faith language, it is important that employers understand what this language may mean. A good faith estimate may mean that slight deviations in pay from the advertised wage are acceptable or it may mean that salary ranges that are too wide will not be considered a good faith estimate, or it may mean both. To best protect yourself and your business, provide a relatively narrow range of expected compensation and ensure that this range is truly what you are prepared to pay for the position.

3.?? How does this affect hiring interviews?

This new law will affect hiring interviews in two ways. First, in the lead up to the hiring interview, employers must be sure to have disclosed any healthcare benefits. There is no specific requirement for when to disclose healthcare benefits other than that those benefits must be disclosed prior to the first interview. To satisfy this requirement Employers may choose to include the information in the job posting with the salary range or they may choose to send the information in an email prior to the first interview.

4.?? How does this affect how I manage my employees after hiring?

Though the majority of the law applies during the hiring process, there are also protections for employees who discuss compensation. Employers must ensure that they do not prohibit employees from discussing compensation and must also ensure that no employees are retaliated against if they do discuss compensation. This means educating yourself as well as your management. There is a narrow exception to this rule to note. Employers may prohibit employees with regular access to wage information of other employees from sharing such information with other employees.

In addition, the law requires employers to post the requirements under this law in a conspicuous location for employees.

5.?? Will this increase my risk of lawsuits?

The law does not give rise to a private right of action. This means that your employees cannot directly sue you or your business for violations. Instead, employees must report the employer to city government. The government will then investigate the claims and decide whether or not to take action. The first violation will result in a $1,000 fine, the second will result in a $5,000 fine, and $20,000 for each subsequent violation. So, while the law does not increase employers’ risk of civil lawsuits, employers should still be careful to follow the requirements to the best of their ability as the fines can add up significantly for violations.

If you would like more information or need assistance in ensuring compliance, please reach out via LinkedIn or [email protected]

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