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Pay Transparency May Come to Michigan

April 22, 2023

By Michael Burns, courtesy of SBAM-approved partner, ASE

SBAM covered the potential implications of this on a recent edition of the Small Business Briefing. Watch here.

Pay transparency is the employer practice of disclosing information about employee compensation standards to others — internally, externally, or both. States and municipalities across the country have enacted or are considering implementation of laws and ordinances that require employers to provide pay data information to the public when putting out hiring notices or when requested by candidates seeking employment.

The stated intent of pay transparency is to address unequal pay. If an employer publishes or provides pay data up front in the hiring process, it allows employees and candidates to better understand and negotiate wages with an employer. Pay transparency also addresses pay disparity. Pay disparity may lead to pay discrimination charges if the reason(s) for pay differences result in lower pay for persons that are of a protected class (sex, race, ethnic, religion, or other characteristic protected by law) and do not have a legitimate business reason for being lower.

There are currently seven states (CA, CO, CT, MD, NV, RI, & WA) that have some type of pay transparency law. There are also several municipalities across the country that have pay transparency requirements for employers in those locations.

Just last week Michigan’s legislature started consideration of its own type of pay transparency requirement. The Democrat majority in Michigan’s House introduced 17 bills intended to address what they call wage theft, independent contractor status, and to stiffen penalties for non-payment of wages, whistleblower violations, and prohibiting employers from telling employees not to share compensation data with each other.

The bill addressing pay transparency is HB 4406. It would amend the existing Michigan Payment of Wages and Fringe Benefits Act to, upon request by an employee, require the employer to provide wage information for similarly situated employees covering a period of up to three years.  “Similarly situated employees” are “those within the same job classification as the employee requesting the information or whose duties are comparable in skill, effort, responsibility, working conditions, and training to those of the requesting employee.”

Wage information is salary and hourly wages as well as bonus, overtime pay, and other forms of compensation.

Further, the bill would prohibit as a condition of employment that the employee sign any waiver or other document the restricts or denies an employee the right to disclose their wages or prohibits discharge, discipline, or any type of discrimination against those who disclose such information.

The Payment of Wages and Fringe Benefits Act covers all Michigan employers with one or more employees, so basically anyone that employs anyone is covered and would have to comply with this amended law.

If passed, because this would apply to all Michigan employers, this new part of the law would compel employers to review existing compensation or if jobs do not have a pay rate assigned would force employers to create or formalize their compensation administration in anticipation of correctly responding to requests for this data. Failure to comply with a request would expose an employer to various penalties, some of which may be made more severe, under other bills introduced in this package of new legislation.

ASE will be following all proposed employment and labor law changes being considered by the Michigan Legislature. For updates watch our weekly EPTW newsletter or join us every other week for Conversations with Mike and Tony.

To learn more, ASE’s upcoming Michigan Pay and Economic Briefing will include a session on pay transparency.

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