Transparency Is Now Mandatory. Is your Business Ready?

by | January 23, 2024

“Truth never damages a cause that is just.”

—Mahatma Gandhi

Whether you like it or not, transparency is now non-negotiable. The push for transparency is stronger than ever, driven by both regulatory requirements and the expectations of key stakeholders.

Business embracing “radical transparency,” where leaders share everything at all levels—from open books, sales performance, hiring practices, and commitments towards DEI—can be a strategic advantage if business address the regulatory gaps in planning and strategy. 

The new regulations expose business owners to a complex legal landscape, removing long-standing protections and adding administrative burdens. To safeguard your business amidst these changes and elevated stakeholder expectations, proactive and informed responses are essential.

The transformative force of transparency regulations calls for strategic approaches, going beyond tactical adjustments. Understanding your business’s risk tolerance and balancing risk and opportunity is vital. In addition to updating documents for compliance, incorporating new tools to mitigate exposure is imperative.

In this post, we take a deep dive into the pressure for transparency—beyond customer and employee transparency wants—to the legal, regulatory, compliance, and cost of transparency practices.  Know what you don’t know, so you and your business can grow boldly – and transparently – in 2024.

At Equinox, we believe in transparency as the best practice –when practiced best. 

Navigating the Increasing Pressure for Transparency

In an era of increasing demands for business transparency, business owners find themselves facing a complex legal landscape that removes long-standing protections and adds administrative burdens. What are the pressures, and what can you do to protect your business in the face of regulatory changes and heightened stakeholder expectations?

Pressure Towards Transparency

The legal landscape is shifting towards greater transparency across many areas of law at both state and federal levels. Some specific areas are governance, employee rights, and data privacy. 

In many cases, this transparency comes at a high cost to businesses by limiting key tools businesses have traditionally relied upon for protection, such as non-compete and confidentiality provisions and privacy of owner’s names. These regulations also demand increased scrutiny and disclosure and open the door to stakeholders’ questions – and lawsuits.

Compliance is not a static concept but an ever-changing landscape that requires vigilance. As a result, businesses must consider the gaps these rules create and adjust to the new exposure by incorporating different protective tools.

Four areas, if left unchecked, can sabotage your business transparency efforts:

  1. Non-Compete Provisions
  2. Non-Disclosures and Confidentiality
  3. Pay Equity
  4. Concerted Activity (Unionization)

Let’s check where your business stands in these areas of new regulations forcing transparency and the exposure they create.

1. Non-Competes

Non-compete provisions have been on the chopping block for many years. Recently, progressive states have implemented either complete bans on non-competes or requirements such as salary thresholds to greatly limit how they can be used. In Washington, a non-compete is enforceable against high-wage employees and only to a maximum of 18 months [see post “Navigating the Complex World of Human Resources and Employment Law“]. There’s a federal rule currently under consideration that essentially bans non-competes nationwide. Similarly, states have forced employers to allow employees to “moonlight” except in limited circumstances. The penalties for trying to enforce a violating provision are also steep.

What do Non-Compete Provisions mean for your business?

If you’ve relied on non-competes or non-moonlighting provisions to ensure your employees don’t work for a competitor, you’ve lost that protection. Often confidentiality and non-solicitation provisions can be enhanced to add protections, but you must be cautious – a non-solicitation provision that is overly broad can be a violation of the law as well. You must ensure your documents are updated to include these additional protections and to not attempt to enforce provisions that are illegal.

2. Non-Disclosures and Confidentiality Provisions

Similarly, the breadth of confidentiality and non-disclosure provisions is being pulled back in a number of states. The Washington Silenced No More Act (2022) prohibits these provisions from forcing “silence” on bad acts such as discrimination, harassment, or assault by a player. [See post “Washington’s Silenced No More Act is effective June 9, 2022“] While it’s been viewed primarily to protect employees, the act is broader than that and would apply to other contracts.

What do Non-Disclosures and Confidentiality Provisions mean for your business?

This means when a claim arises from these bad acts, the business cannot hide them behind a non-disclosure provision. It means that the business must be more aware of the public relations and communications tools to protect it when such a bad act occurs. It also means that all documents with these provisions must be updated.

3. Pay Equity

Pay Equity is another trending area demanding transparency. In Washington, the Equal Pay and Opportunities Act (2018, Amended 2022) mandates transparency in compensation to address wage disparities. Job postings for employers with 15+ employees must include salary ranges and benefits. [See post “Washington Bill Addresses Wage Transparency and Equal Pay“]

What does Pay Equity mean for your business?

The technical aspects of this law are critical – law firms are actively seeking applicants for job postings that don’t meet the requirements and filing class action suits against those companies. It’s an easy win for them because the violation so visible and public. Be certain you understand the law’s requirements and implement it fully.

4. Concerted Activity

Most businesses don’t really think about “concerted activity”. It’s a term that is mostly heard around unionization. Yet, unionization is real and becoming more popular in unexpected places. Take a look at Starbucks’ experience. Recent decisions from the National Labor Relations Board (which apply to all businesses) underscore the increasing protection of workers’ right to “concerted activity”. Most specifically, the Stericycle decision [See post “New Ruling Impacts Workplace Policies for All Employers“] which will interpret any business policy in light of an employee dependent upon the employer. It assumes the policy exists to restrict the employee, and the business must show that it exists for a legitimate business purpose.

What does Concerted Activity mean for your business?

All policies must be reviewed in light of their impact on the employee and must have a legitimate business purpose that is not solely to restrict the employee’s behavior. If this sounds like a big deal, it is. Businesses should update policies in light of Stericycle. With the rising trend toward unionization, managers need to know what to do (and more importantly, what not to do) when faced with concerted activity.

Corporate Transparency Act Compliance

The CTA is getting a lot of visibility because it requires all businesses with fewer than 20 employees or $5M in revenue to file certain specifics about the ownership of the company with the federal government beginning in 2024. Existing companies must file by 12/31/24; new companies must file immediately following incorporation. [See post “Corporate Transparency Act – What every small business needs to know about the upcoming reporting requirements“] Companies that wish not to have owners’ information publicly available are at risk with this new law. Again, the goal of transparency for the greater good prevails at the sacrifice of administrative cost and privacy for businesses.

What does the Corporate Transparency Act mean for your business?

The demand for business transparency is a transformative force that requires you to be proactive and informed. While these new rules require tactical changes, the bigger opportunity is strategic. Legal guidance is not just tactical but strategic. Understanding your business’s risk tolerance and crafting solutions that balance risk and opportunity are essential. It’s critical that you update your documents for compliance – and incorporate new tools that mitigate the exposure created in light of your business’ operations and risk tolerance.

Don’t inadvertently hit self-destruct buttons of unchecked:

  • Non-Compete Provisions
  • Non-Disclosures and Confidentiality
  • Pay Equity
  • Concerted Activity (Unionization)

Schedule a complimentary checkup with our team, or take a self-guided Business Health Assessment to see where your business stands.

“Transparency, honesty, kindness, good stewardship, even humor, work in businesses at all times.” – John Gerzema

Check out these transparency resources:

  1. Why Startups Should Embrace Radical Transparency – HBR
  2. The 2023 Edelman Trust Barometer Special Report – Edelman
  3. Transparency In Business: 5 Ways To Build Trust – FORBES
  4. How much ‘radical transparency’ in a workplace is too much? – BBC
  5. Corporate Transparency Act – What every small business needs to know about the upcoming reporting requirements   – EQUINOX