To date, 14 states, including California, New York, and Washington, have enacted pay transparency requirements, while several others have proposed similar legislation that may soon become law.
For employers looking to get ahead of the compliance curve, understanding the reach and risk of these laws is key.
What are Pay Transparency Laws?
Generally, these laws are designed to promote pay equity. They typically require employers to disclose salary ranges in job postings or upon request by an employee.
Additionally, many of these laws prohibit employers from asking job candidates about past compensation to avoid replicating already existing wage disparities tied to gender, race or other protected categories.
What is the Current Legal Landscape in Michigan?
Michigan hasn’t enacted a statewide law governing pay transparency—at least not yet.
In 2023, lawmakers introduced HB 4406 which, if enacted, would amend existing law to require employers to provide employees with wage information about “similarly situated employees” within 30 days of request.
In a similar move toward greater transparency, SB 142—also introduced in 2023—would require employers to make the relevant job description and salary information available to applicants during the recruitment, hiring or promotion process.
Although no statewide mandates have become law in Michigan, the city councils in Detroit and Ann Arbor have already adopted pay transparency ordinances that many employers will want to make note of.
In Detroit, for example, employers bidding to contract with the city must demonstrate that they comply with equal pay mandates, while in Ann Arbor, the city requires that job postings for municipal government positions include wage ranges and other information.
Of course, even if pay transparency isn’t yet codified statewide, pay equity certainly is, including through statutes such as the Equal Pay Act (EPA) and Elliott-Larsen Civil Rights Act (ELCRA). Additionally, Michigan companies that employ individuals outside the state may be subject to the requirements that other states have enacted.
Trends in Other States
Failing to abide by applicable wage disclosure laws and equal pay requirements opens the door to costly litigation, and there are ongoing debates about whether an alleged violation of transparency requirements is covered by provisions commonly found in employment practices liability policies.
In Washington, the state’s pay transparency requirement sparked what many business leaders there view as a “cottage industry” where job applicants search for non-compliant job postings, then apply for the position not in hopes of landing the job, but to give themselves legal standing to sue the employer. Roughly two years after going into effect, Washington’s pay transparency law was the basis of roughly 250 lawsuits.
What’s Next for Michigan Employers?
Now is a good time for Michigan employers to review their job postings and internal pay practices as one way of staying ahead of the curve while they wait to see what future legislation brings. As part of that review, employers might conduct a pay audit to verify equity, establish clear salary ranges, update pay policies and train key personnel.
Employers in Michigan that operate in other states should take stock of any pay transparency requirements in those places to ensure their recruiting and employment practices meet or exceed all applicable standards.
Complying with applicable pay transparency laws now can help avoid legal headaches later, and it may also help boost goodwill and morale, which are critical for attracting and retaining quality employees.
Erik G. Bradberry
38505 Woodward Ave., Suite 100
Bloomfield Hills, MI 48304
248-433-7172
ebradberry@plunkettcooney.com
Lizbeth Lopez-Bermudez
38505 Woodward Ave., Suite 100
Bloomfield Hills, MI 48304
248-901-4000
LLopez-Bermudez@plunkettcooney.com
