Law360: How DC Pay Transparency Law May Or May Not Impact Firms

Alison Knezevich | July 12, 2024, 4:36 PM

As Washington, D.C., joins a national movement to require job postings to include pay ranges and to ban employers from asking for salary histories, recruiters predict an uneven effect in the district's legal market.

Some are hopeful that the newly enacted District of Columbia Wage Transparency Omnibus Amendment Act will help address long-standing pay disparities for women and attorneys of color, while others anticipate little effect. The law is likely to affect attorney job seekers differently depending on factors such as the size of a firm, and whether the candidate is applying to work in-house, recruiters told Law360 Pulse.

"This is not a one-size-fits-all impact," said Dan Binstock of D.C. legal recruiting firm Garrison.

Growing in popularity in recent years, state and local laws requiring pay transparency and banning salary history requests aim to address discriminatory gender and racial wage gaps.

In the legal industry, the practical effect will depend on a job seeker's situation, observers say.

For instance, while the pay range listing requirement will have little impact on BigLaw associates whose pay scales are already well-known, some firms keep information about associate compensation closer to the vest, Binstock said. These include smaller firms and those that don't follow a lockstep model.

"Some of those firms are more reluctant to share the range of their compensation scales so overtly," Binstock said. "This may present more of a departure from their norms."

Meanwhile, partner openings are rarely advertised, so the salary posting requirement is not likely to apply, Binstock said.

What's clear is that recruiters have seen candidates be put at a disadvantage when they have been asked to disclose what they have been paid in prior jobs. The new law, which took effect June 30, prohibits employers in Washington, D.C., from asking for a job applicant's pay history.

"We've seen time and again, when people disclose their compensation to a law firm, they do use it as a starting point," said Jeffrey Lowe, founder and managing partner of Jeffrey Lowe Partners. "And if somebody's already starting lower than where they should be based on their practice, it can't help but negatively affect them."

When employers can't ask for compensation history, job candidates "don't have to disclose those hurtful numbers, and so they have a much more level playing field when negotiating compensation with the law firm," Lowe said.

Lowe said this is especially helpful for people with significant practices who are undercompensated, "because they're going to be able to share with the firm the size of their practice, without having to disclose [their compensation]."

Debbie Tang, a partner with the minority-owned executive search firm Bridge Partners, recalled her work with a large company that had two candidates in mind for a senior attorney role.

"One was a white male who was coming from a law firm, and the other was a woman attorney of color who was working on Capitol Hill," Tang told Law360 Pulse. "And they would match his salary at the law firm to get him in, but they wouldn't give her the same salary for the same job."

Tang, who has practiced law both in-house and in BigLaw, recruits candidates for C-suite roles, including for general counsel and chief legal officer positions. She publicly advocated for Maryland's pay transparency law, which took effect in 2020, banning employers from asking for salary history and requiring them to disclose a pay range to job applicants who ask. Starting in October, employers in the state will have to provide a pay range for public and internal job listings.

Tang said that when companies are up-front about pay, it helps to ensure that candidates and salaries are aligned. She said there are situations where people go through multiple interviews, only to finally get an offer that is much less than their current pay.

"Why wouldn't you make sure from day one that you're on the same page?" she said. "When the salaries are more transparent, you avoid that ... inefficiency and waste of time."

She added: "It's just better for everybody when it's out there — when there's a range, and you can say, 'I'm not going to apply to this job, because it's not in the range of my expectations.'"

Tang said the law could have more immediate effects for in-house attorneys than firm lawyers whose compensation depends on how much business they bring in.

In New York City, which has required employers to include pay ranges with job advertisements since 2022, recruiter Daniel Vahab, founder of DRV Staffing, said it can promote a sense of fairness, equality and transparency.

"It can also help save time and increase efficiency by filtering candidates to ensure compensation range is in line," he told Law360 Pulse in an email. "It also creates more competition, since you can see what your competitors pay and can try to increase yours or at least match your competitors."

At the same time, when the advertised compensation is not flexible, "it can deter potential good talented attorneys that are already paid at the high range and would need at least a small bump to justify a move," he said.

California enacted a pay transparency law last year. Michelle Fivel, a founding partner of legal recruiting firm Hatch Henderson Fivel who focuses on New York and Southern California, said it can make the negotiation process more efficient, as candidates already know the pay range. Firms still ask about what candidates expect to be paid, she said.

"They are permitted, and they do very frequently ask, 'What is their compensation expectation? What class year do they expect to come in at?" she said.

Around the country, states are continuing to jump on the pay transparency bandwagon. Illinois, Minnesota and Vermont are among those that have new laws taking effect next year.

A recent analysis of Glassdoor data by the National Women's Law Center, which supports pay transparency laws, found that the trend affects job postings even in states without such requirements.

"The share of Glassdoor job listings with pay disclosure increased over time among all selected states — even among those without pay range transparency laws," according to the analysis, released in March.

The report added that "it's notable that industries in some states without pay range transparency laws are showing increased pay disclosure rates, indicating that some employers are proactively jumping on the pay transparency bandwagon — even without a legal obligation — because they see it as a benefit for their businesses to attract and retain top talent."

Lauren Drake, a Washington, D.C.-based partner with the legal recruiting firm Macrae, said she does not anticipate much impact at all in the District's legal market.

Drake recalled that, for a while after New York and California prohibited employers from asking for past salaries, she saw firms tell partner candidates in those states they did not have to fill out the compensation history section of lateral partner questionnaires. But she has since seen firms in those markets asking for pay histories again, saying that partners are not employees.

Around that time, she also saw some job candidates in D.C. who felt they were underpaid decline to disclose their compensation with firms, even though D.C. didn't have such a law at the time.

"It sort of emboldened them to say on [a lateral partner questionnaire], 'I prefer not to share that information,'" she said. "I don't think people would have felt emboldened to do that prior" to the laws.

Amy Savage, chair of the government enforcement and regulatory group at recruiting firm Lateral Link, said that the impact of D.C.'s law on partner hiring is unclear at this early stage, but there could be pushback from firms over equity partners.

"Some firms might take the position that equity partners are not employees" and that the prohibition against requiring disclosure of an "employee's" wage history would not apply, she told Law360 Pulse by email. "Firms almost always ask for compensation history in their lateral partner questionnaires. They might consider continuing to do so if, for instance, they determine that equity partners do not qualify as employees or do not fall under the Act for other reasons."

Many D.C. employers, including law firms, are already operating on a national scale, so they are well-versed in pay transparency laws, said Davis Wright Tremaine LLP employment law partner Jeremy Merkelson.

"Many firms are already doing the things that are required by virtue of compliance with other state law," said Merkelson, who added that job postings are often handled by third-party vendors that also operate nationally.

Merkelson noted that while associate salaries at many firms are based on years of experience and so are already publicly known, firms also hire for a range of jobs that don't follow a pay scale.

"Many firms hire for positions that are outside of the traditional lockstep associate model, and it's going to force them to think creatively about how they're going to address that," he said.

Increased transparency in wages for nonattorney positions, such as paralegals and support staff, "may impact how the labor market ... or the pay for those positions unfolds over the next few years," Merkelson said.

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