New Pay Equity Law in Rhode Island Set to take Effect on Jan. 1, 2023

If you have employees working in the state of Rhode Island, get ready for a big change. The governor signed new pay equity law that goes into effect on January 1, 2023. Despite the fact that this is over a year away, you need to plan now for these new rules. This blog will get you started on your preparations.

What You Need to Know about the New Pay Equity Law

Here’s what you need to know about equal pay laws:

• 42 states have them.
• 8 states allow small businesses to opt out of these rules.

The newest addition to these rules has been the requirement that you cannot ask an applicant their salary history as part of the initial employment discussion. In most states, pay equity laws strive to bridge the considerable gap that still exists between men and women. But Rhode Island’s law is different. The rules require employers to change their behaviors in ways that go beyond gender equity.  

According to the Society for Human Resource Management (SHRM), the Rhode Island law prohibits a company from paying an employee “at a wage rate less than the rate paid to employees of another race, or color, or religion, sex, sexual orientation, gender identity or expression, disability, age, or country of ancestral origin or comparable work.”  

The state defines “wage” as all the types of compensation available, except for tips and overtime. They also define “comparable work” as work that requires a similar skill and responsibility. Under this rule, if two employees are performing comparable work, they should make the same amount, unless the employer cites some of these exceptions:

• Employee seniority.
• If you have a documentable merit system in place.
• Differences in geographic locations.
• An employment system that measures earnings by quality or quantity.
• Shift differentials.
• Job-related experience, education, or training.
• If one employee travels related to work.

So, how do you comply with this?

First, you cannot reduce any employee’s wages to bring them in line with the lower-paid employee. Employees also cannot agree to this.  

There is a deferred penalty for this new rule, according to SHRM. Through June 30, 2026, employers can defend themselves from liability and penalty under this law if they can prove that they:

• Conducted an evaluation of their pay practices within two years of the proposed penalty or a lawsuit from an employee.
• Eliminated the unfair wage differentials before the deferral date.

Basically, employers must conduct their self-evaluation so that they can avoid compensatory damages. However, they may still be liable for unpaid wages.  

The law also requires that employers, recruiters, or hiring managers refrain from asking applicants about their wage histories. The candidate can voluntarily disclose details of salaries, and the employer must provide a wage range for any position they offer. Employers are also prohibited from retaliating against employees who discuss wages amongst themselves.

The penalties for non-compliance are steep, ranging from $1,000 to $5,000 per incident. The new law also allows employers or candidates to file in court and potentially receive compensatory damages of up to $10,000 and more.  

This area of the law is constantly changing.

Stay on top of these rules and reduce your risk by working with an EOR like FoxHire. We manage the back-office processes around your employees and can help you stay in compliance with these and other rules. Call on us to find out how we can help.