Have We Reached a Tipping Point for Pay Transparency in the US?

Many workers in the US are afraid to discuss their salaries with their colleagues, as they fear this could get them into trouble with their companies.

However, it’s actually illegal for most US employers to ban employees from discussing their pay with colleagues or punish them for doing so, thanks to the National Labor Relations Act (NLRA) of 1935.1

Also, at the time of writing, 17 states and multiple municipalities have additional pay transparency laws, and more states are in the process of writing them. Many of these require recruiters to share salary ranges during the hiring process and ban them from asking questions about a candidate’s previous salary (to prevent a cycle whereby someone earns less just because their previous employer paid them less).

States with pay transparency mandates

States with notable pay transparency laws include:

• Massachusetts: Since 2018, Massachusetts employers have not been allowed to ask job applicants about their salary histories. Also, as of 2024, Massachusetts organizations with 25 or more employees must provide the pay range for someone’s current position upon request, and larger organizations must file annual reports with their pay statistics—broken down by race, ethnicity, sex, and job category—to help address systemic wage gaps.23
• Colorado: Colorado was the first state to require that salary ranges be included in every job posting (in 2021). Initially, many employers tried to get around the rules by blacklisting Colorado applicants, but after other states started to adopt similar mandates, most companies gave up on this strategy.4
• California: In 2016, California’s Fair Pay Act mandated that work of equal value should be paid the same (i.e., companies can’t use job titles to hide pay gaps). The act also explicitly forbid employers from stopping employees from discussing wages. In 2018, the state banned employers from asking about salary history, and, in 2023, it enforced a salary range mandate like Colorado’s (recently updating this law to require “good faith” ranges, since many employers were posting ranges too wide to be useful).567
• Washington State: In 2022, Washington State also updated its Equal Pay and Opportunities Act to enforce a salary range rule similar to Colorado’s. It went a step further by mandating a list of all benefits (e.g., health insurance and retirement benefits) and other compensation (e.g., bonuses and stock options) so that employers couldn’t use extras like these to hide pay disparities.8910
• New York: Pay transparency laws passed in New York City and New York State have been particularly influential, since so many global companies are headquartered there. New York City banned questions about salary history in 2017, and New York State later also passed a salary history ban (in 2020).1112

This is great news if you’re a worker in one of those states. Workers elsewhere also stand to benefit, since laws in one US state usually influence the rest of the country. This trend is often called the “California Effect.”

The California Effect

The California Effect describes how a single, large jurisdiction like California can influence the laws in other states (or even countries) by forcing them to adopt stricter regulatory standards.

The phenomenon was explored by political scientist David Vogel in his 1995 book, Trading Up: Consumer and Environmental Regulation in a Global Economy. Vogel mainly wrote about emission standards for cars, but the California Effect also has implications for pay transparency.

The California Effect in the context of pay transparency

Many businesses have their headquarters in California, New York, and other areas with mandates, and these companies also often want to hire remote workers from around the country. In this environment, it can be difficult for employers to juggle different sets of rules for different employees, so it’s often easier for them to standardize everything for their entire organization.

This dynamic was cited in a report from World at Work (an association for HR professionals who handle compensation, benefits, and pay equity). The report stated that “the increasing commonality of distributed workforces combined with the breadth of talent residing in states with pay transparency legislation will force organizations to implement a nationwide pay transparency strategy.”

In other words, according to this report, many companies will standardize their pay scales to keep hiring simple. If this is true, American workers can expect to see salary transparency increasingly become the default, even in states that hold out against pay transparency mandates.

Further afield, Europe is preparing to enforce a new law on June 7, 2026 that could radically change the landscape for job seekers and employees. Although it only applies to European companies, it may have knock-on effects around the world, including in the US.

The law in question is referred to as the EU Pay Transparency Directive. It’s being heralded by business experts as “the most comprehensive piece of pay and workplace equity law in the world enacted since the 1960s.” 131415

The main purpose of the EU Pay Transparency Directive is to close the gender pay gap. However, it could benefit all workers in quite a few important ways.

The short version is that, in Europe, many companies will face pressure to be more open about pay, making it much harder for them to hide what their employees are earning from their peers, future hires, and the public. Companies will also have to investigate any gender pay gaps that exceed a relatively small 5% threshold set by the EU.

As with the California Effect, laws from the EU have been seen to influence the US. These kinds of changes can happen through market forces. The dynamic is sometimes referred to as the “Brussels Effect.”

The Brussels Effect

The “Brussels Effect” was a term coined by Professor Anu Bradford in her 2012 paper of the same name. Professor Bradford’s work described how EU laws often become de facto standards for the rest of the world.16

A classic example of the Brussels Effect is the standardization of USB-C charging ports, which famously meant that Apple stopped using proprietary cables for iPads and iPhones everywhere, since they were no longer allowed to do so in Europe.

Another is the General Data Protection Regulation (GDPR) that the EU passed in 2016, which caused websites to update their data privacy policies and start using cookie consent pop-ups globally.17

Professor Bradford explained in a Columbia Law School briefing that the GDPR essentially banned data transfers to countries without similar protections. This forced companies like Google and Apple to revise their policies across the world, as they found it “difficult to follow different privacy standards in different markets” and elected to “apply the strictest international standards across the board.”

In 2018, soon after the GDPR went into effect, California passed the California Consumer Privacy Act (CCPA), followed by the California Privacy Rights Act of 2020 (CPRA). Their purpose was largely to ensure that US tech companies could operate and trade in Europe without violating the GDPR—an instance of the Brussels Effect in the US.18

How the Brussels Effect could impact US pay transparency

There are various mechanisms through which the Brussels Effect might affect US companies and the salaries of their employees:

• Standardization at companies with European offices: Global companies with European employees will have to comply with the EU Pay Transparency Directive for their European operations. As a result, these companies have an incentive to adopt rules that are consistent.
• Global vs. domestic talent wars: If companies want to attract the best workers, they’ll face pressure to match other businesses’ transparency standards. For example, if an accounting firm in Miami is competing for workers against a global giant, they may deter top talent if they keep their salaries hidden.
• New standards for ESG compliance: “ESG ratings” measure how ethically companies operate (ESG stands for “environmental, social, and governance”). Per the EU’s new regulation, if a company tries to hide its salaries, it risks getting a low ESG score, which can deter investors.

US pay transparency laws vs. the EU Pay Transparency Directive

Although more and more states are clamping down on salary secrecy, the EU Pay Transparency Directive is set to go much further than any of the previous state mandates in the US.

As such, if we do see a Brussels Effect from this new law, it could significantly bolster the workplace rights of American workers via the mechanisms above, such as the competition for talented employees and the need to attract investors.

Here’s how the new law could change things for US employees.

• Rights beyond the offer letter: Existing pay transparency rules give US job applicants more power during the hiring process. However, the new EU standards may mean that current employees will get more power to see how their compensation compares with their colleagues’ (including all the benefits and other extras employees receive on top of their salaries).
• Shifting the burden of proof: Under US pay transparency rules, if you think your company is paying you unfairly, the burden of proof is on you to show that you’re being discriminated against. To prove this, you would need to know your coworkers’ pay—which is usually a closely guarded secret. The EU Pay Transparency Directive flips things around so that the employer must prove that pay discrepancies are justifiable given the job duties involved, and they must use gender-neutral criteria to do this.

Early signs of the Brussels Effect

For now, it remains to be seen how much influence the European Pay Transparency Directive really will exert in the US and other non-EU countries.

However, even though the law doesn’t come into effect until June 7, 2026, there are already early signs that it will leak into other countries outside the EU.

UK court cases

The UK has seen a number of high-profile court cases (e.g., against major retailers like Next and Tesco) where the claimants cited EU laws regarding “equal value pay.”

The concept of equal value pay means that jobs don’t have to be identical to qualify for the same salary. The women who brought these claims were able to use this idea to prove that their roles working on shop floors were of equal value to warehouse roles that were usually held by men.1920

Updates to software platforms

The tech industry has also been feeling the Brussels Effect. Global HR platforms like Workday and SAP have been updating their 2026 software modules to meet EU standards. They now include tools that flag pay gaps and restrict salary offers that don’t align with company-wide averages.2122

Legal advice

Law firms are telling businesses in non-EU countries, such as Switzerland, Canada, and the US, that they should treat the EU Pay Transparency Directive as the new baseline for global HR operations.232425

Legal experts now caution that it’s safest and easiest to just follow the strictest rules everywhere for employee compensation.

Consultants like Mercer and KPMG have reported that US companies are already performing audits and standardizing their pay scales globally to avoid the mess of having different rules for different countries.2627

The California Effect provides a historical blueprint for how the rules in one large state can influence everyone else and how pay transparency mandates could have ripple effects on the rest of the US labor market (including companies in nonmandate states).

Even if US employers resist the trend toward salary transparency, they will face a lot of pressure to move in that direction.

For US job seekers and workers, the EU Pay Transparency Directive, along with the wave of pay transparency mandates inside the country, has the potential to tip the employer–employee power balance much more in their favor.