PAY EQUITY IN THE SPOTLIGHT: HOW STATE-LEVEL CHANGES COULD IMPACT YOUR CLIENTS

As federal pay equity initiatives stall, states are stepping in with their own legislation, creating a rapidly evolving compliance landscape for employers. State lawmakers are passing measures that redefine compensation transparency, wage reporting and hiring practices — often without the labor law posters or handouts that typically signal regulatory changes. This means businesses must proactively track new laws to avoid compliance gaps and potential penalties.

THE EVOLUTION OF PAY EQUITY LAWS IN THE U.S.

The push for pay equity is not new. The federal Equal Pay Act of 1963 was one of the earliest efforts to address wage disparities, followed by Title VII of the Civil Rights Act of 1964. However, significant gaps remained, leading to the Lily Ledbetter Fair Pay Act in 2009, which extended the timeline for filing pay discrimination claims. Despite these federal efforts, the gender and racial pay gap persists, prompting states to act where Congress has not.

THE GROWING MOMENTUM BEHIND PAY TRANSPARENCY LAWS

Pay equity and transparency laws are gaining traction across the country. In 2024 alone, New Jersey, Massachusetts, Vermont, Minnesota and Maryland passed robust pay transparency legislation, with Illinois set to follow in 2025. These laws impact everything from recruitment and retention strategies to compensation frameworks, making compliance increasingly complex for multistate employers.

For instance, some states now require salary ranges to be disclosed in job postings, while others mandate disclosure only upon request. Meanwhile, several states impose reporting requirements on businesses, compelling them to analyze and submit pay data based on job classification, gender and race. Employers must navigate this patchwork of laws carefully, as failing to comply can result in penalties and reputational risks.

EXPANDING PAY DATA REPORTING REQUIREMENTS

A growing number of states are implementing pay data reporting laws, requiring businesses to submit detailed compensation reports to regulatory agencies. California has led the charge with stringent reporting mandates, and states like Colorado and Oregon are quickly following suit. These laws require companies to break down pay data by factors such as gender, race and job level, increasing administrative burdens and compliance costs.

Beyond the legal risks, these laws introduce operational challenges. Many businesses lack the necessary data tracking infrastructure to compile and submit reports accurately. Compliance requires strong HR systems, clear pay structures and ongoing legal monitoring. Without these measures, businesses risk noncompliance, which can lead to fines and enforcement actions.

Key Takeaway: Tracking state-level pay data reporting laws is essential to mitigating risk and staying ahead of changing regulations.

PAY TRANSPARENCY’S GROWING INFLUENCE ON HIRING PRACTICES

As pay transparency laws expand, they are reshaping hiring and compensation strategies. Requiring salary range disclosures in job postings has a ripple effect, forcing businesses to reassess internal pay structures, job leveling and market competitiveness. Transparency requirements can also impact employer branding, workforce morale and talent acquisition strategies.

Multistate employers face the added challenge of creating standardized yet compliant job posting policies. The nuances of state laws mean that a single nationwide approach may not work. Some states demand more than just salary disclosure, requiring information on benefits, bonuses or pay progression. HR and legal teams must stay informed on each state’s specific mandates to avoid missteps.

Additionally, companies must be mindful of how pay transparency laws influence employee expectations. Internal pay audits and equity adjustments may become necessary to ensure compliance and maintain workforce satisfaction.

Key Takeaway: New pay equity laws are changing hiring and compensation practices. Businesses must adapt to ensure compliance and avoid penalties.

COMMON COMPLIANCE CHALLENGES EMPLOYERS FACE

Navigating state-level pay equity laws comes with several hurdles:

• Inconsistent State Requirements:  Employers operating in multiple states must balance varying compliance obligations, creating a complex regulatory puzzle.
• Lack of Standardized Data Practices:  Many companies do not have streamlined processes for collecting, analyzing and reporting pay data, increasing the risk of errors.
• Legal Gray Areas:  Some states’ pay equity laws leave room for interpretation, making it difficult for employers to determine the best course of action.
• Internal Resistance:  Changes in pay disclosure policies and reporting requirements may face pushback from leadership, finance or legal teams, complicating implementation.

To address these challenges, businesses should invest in compliance training, update payroll and HR systems, and establish clear protocols for responding to new pay equity regulations.

THE FUTURE OF PAY EQUITY REGULATIONS

While state laws continue to gain momentum, federal action on pay equity remains uncertain. The Paycheck Fairness Act, which would have strengthened pay transparency and reporting at the national level, has wavered in Congress multiple times. In the absence of sweeping federal legislation, experts predict more states will enact their own pay equity laws.

Looking ahead, businesses should anticipate:

• More states adopting pay transparency laws, following the lead of 14+ states with such legislation.
• Expanded pay data reporting requirements that could include more detailed workforce segmentation.
• Increased enforcement efforts as state agencies ramp up audits and penalties for noncompliance.

STAYING AHEAD OF REGULATORY CHANGES

State-level compliance shifts can happen quickly, and businesses that remain reactive instead of proactive may find themselves at risk. Keeping an eye on emerging legislation ensures organizations stay ahead of the curve and maintain a legally sound approach to compensation management.