Labor & Employment Law Daily Wrap Up, EXPERT INSIGHTS—The pay transparency laws to know in 2025 in the United States and beyond, (Feb 26, 2025)

By Kelly M. Cardin and Thelma Akpan of Littler Mendelson

• Pay transparency laws are transforming workplace norms and employer responsibilities across the United States and beyond.

• Several states' pay transparency laws take effect in 2025.

• The European Union's Pay Transparency Directive introduces further obligations for businesses operating in EU member states

It was once considered impolite to discuss salary in the workplace. Now, thanks to shifting workplace standards and social media, open conversations about pay have become the norm worldwide. Employees frequently share their compensation details online, challenging the long-held secrecy around salaries at work.

While employees in many countries have long had the right to discuss wages with colleagues, many remained unaware of their employer's pay practices overall. Now, jurisdictions across the United States and abroad are enacting laws that require employers to disclose salary ranges, shifting the balance of power in compensation conversations. However, these laws vary widely across jurisdictions, creating a complex compliance landscape for multinational companies.

In the United States, new pay transparency laws took effect last month in Illinois and Minnesota, with New Jersey, Vermont, and Massachusetts set to follow later in the year. While details vary by state, most of these laws mandate the disclosure of salary ranges in job postings and impose additional obligations on employers. Meanwhile, employers operating in Europe are preparing for the implementation of the EU Pay Transparency Directive ("Directive"), which EU countries have until June 2026 to implement. With wage transparency at the center of global employment policy, the following is a brief roundup of the pay transparency laws taking effect this year:

Illinois:

• Effective January 1, 2025;

• Applies to employers with 15 or more employees;

• Requires disclosure of pay scale and benefits in job postings;

• "Pay scale and benefits" means "the wage or salary, or the wage or salary range, and a general description of the benefits and other compensation, including, but not limited to, bonuses, stock options, or other incentives the employer reasonably expects in good faith to offer for the position";

• Employers must announce, post, or make known all promotional opportunities to all current employees within 14 days after the employer makes an external job position available; and

• Covers all positions performed in Illinois at least in part or where the employee reports to an Illinois-based supervisor, office, or work site.

Minnesota:

• Effective January 1, 2025;

• Applies to employers with 30 or more employees in Minnesota;

• Requires disclosure of salary range or fixed pay rate and benefits in job postings;

• Salary range means the minimum and maximum annual salary or hourly range of compensation, based on the employer's good-faith estimate, for a job opportunity at the time of the posting; and

• Benefits means a "general description of all of the benefits and other compensation," including but not limited to "any health or retirement benefits to be offered to a hired job applicant."

New Jersey:

• Effective June 1, 2025;

• Applies to employers with 10 or more employees over 20 calendar weeks that do business, have employees, or take applications in New Jersey;

• Requires disclosure of hourly wage or salary range in both internal and external job postings, as well as benefits or other compensation benefits eligible to the employee; and

• Employers must "make reasonable efforts to announce, post, or otherwise make known opportunities for promotion that are advertised internally within the employer or externally."

Vermont:

• Effective June 1, 2025;

• Applies to employers with five or more employees;

• Must include a fixed compensation or range of compensation for each position in the job posting, applies to both internal and external postings;

• "Range of compensation" means the good-faith expectation of the minimum and maximum annual salary or hourly wage range for the position; and

• Applies to any job posting for a position that is either physically located in Vermont or a remote position that will "predominantly perform work for an office or work location that is physically located in Vermont."

Massachusetts:

• Effective October 29, 2025;

• Applies to employers with 25 or more employees in Massachusetts;

• Employers must provide the pay range for a "particular and specific employment position" in the job posting for that position;

• Employers must provide the same information to an internal employee who is offered a promotion or transfer to a new position with different job responsibilities;

• Employers must, upon request, provide the pay range for a "particular and specific employment position" to an employee holding that position and an applicant for that position;

• "Pay range" is defined as the annual salary range or hourly wage range that the employer reasonably and in good faith expects to pay for the position at that time; and

• Employers with 100 or more employees must submit wage data reports annually, with the first due February 1, 2025.

These states join Colorado, California, New York, Washington, Hawaii, Maryland, Nevada, and others in mandating pay range disclosures in job postings.

Failure to comply with pay transparency laws can have repercussions. In most states, employers can face civil penalties or fines. Some jurisdictions have a cure period, which allows a company the opportunity for compliance before the issuance of any fines. Most states seem to be enforcing their pay transparency laws in a manner aimed at coaching employers into compliance, rather than in a punitive fashion.

For multinational employers, compliance challenges extend beyond U.S. borders. The European Union's Pay Transparency Directive, taking effect in June 2026, introduces further obligations for businesses operating in EU member states.

Key EU Pay Transparency Directive Requirements:

• Employees are entitled to certain information about pay ranges;

• Employers must provide the initial pay or pay range in each job posting or before the interview;

• Pay secrecy and inquiries into salary history will be banned;

• Certain employers must provide mandatory gender pay gap reporting; the size of the employer dictates when and how regularly reporting is required. Employers with 150 or more workers with pay gaps that are unresolved by January 1, 2026, will have these gaps publicized in the organization's first mandatory report. Covered employers must undertake a joint pay assessment (essentially an audit) to investigate and remedy gender pay gaps that meet a certain threshold.

Given the timeframes set by the Directive, it is important to start considering the impacts now. Employers will need support to navigate the challenges of this new Directive.

The Wrap Up

Pay transparency laws are transforming workplace norms and employer responsibilities across the United States and beyond. While these laws pose compliance challenges, they also present an opportunity for businesses to strengthen their employer brand by demonstrating commitment to fair pay practices. To stay ahead, companies should proactively review and update their pay policies, ensuring they align with both current legal requirements and evolving workforce expectations. Employers should also revisit pay ranges in existing job advertisements, particularly those in evergreen postings, to confirm compliance in these new jurisdictions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Kelly M. Cardin and Thelma Akpan

Littler Mendelson

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Tel.: +1 213 443-4245

E-mail: JKlein@littler.com

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