One of C2’s government contracting clients recently asked us to review their employment application and offer suggestions on whether it needed updating.  One of the application questions requested that the applicant list his or her compensation at their three most recent positions.  When we suggested to the client that this question be removed or, at least, revised, the client was confused as to why.  After all, isn’t what someone has made before an important factor in considering what you should pay them now?  And salary history has been a common question posed to job applicants for decades – why the need to change now?  As we explained to our client, many states are enacting laws to prohibit salary history questions on employment applications.  The rationale behind these new laws requires some further explanation.

A. Background

In recent years, state legislatures have taken it upon themselves to craft a variety of employee protections that are just not present in our federal HR laws. Protections such as meal/rest periods, paid family/sick leave, “ban the box” laws, and extending employment protections to LGBTQ individuals are all examples of states’ efforts to enhance employment protections for its citizens.  There is, however, a new type of law “making the rounds” through state legislatures – salary history bans.  These laws, in essence, ban employers from asking candidates about their salary history as part of the job application and/or interview process.

Historically, using applicants’ salary history has been a standard tool for many employers to eliminate applicants from the hiring pool: “This person is too expensive.” “At that low rate of pay, this person must be unqualified.” Another common reason employers offer for asking about salary history is to ensure they’re not putting candidates through the interview process who are already earning more than the budget available for the position.

However, there can also be some misguided motives at play as well. Employers often try to determine what to pay for a position by asking the candidates about their salary history. Other employers may hope to save on budget by lowering an expected offer based on a candidate’s pay history, which is lower than market if.  However, basing an applicant’s in-coming compensation on their salary history can also perpetuate the salary disparity that exists for minorities and women.  For example, if Sally historically has earned 10% less than her male counterparts of similar education and experience, then her pay at a new job is likely to reflect (and perpetuate) that 10% historical pay disparity, if her prior compensation is used as a guide.  By eliminating employers’ ability to inquire about salary history, many state legislatures are hoping that the pay disparity gap will continue to shrink.

that

 B. Jurisdictions with Pay Disparity Laws

States that have enacted some form of salary history ban for private employers include California, Connecticut, Delaware, Hawaii, Massachusetts, Oregon and Vermont. Localities with similar salary history bans include Cincinnati (starting in 2020), New York City, Philadelphia (pending a legal challenge), Puerto Rico and San Francisco, as well as several counties in New York. Additionally, some states and localities ban salary-history inquiries by public employers only (i.e., government agencies).

The number of jurisdictions that are enacting some form of salary history ban continues to grow.  For HR professionals and hiring managers, this growing patchwork of laws requires vigilance and training so that everyone involved knows what information they can and cannot request from a job candidate, depending on the laws of the jurisdiction where the applicant will be working.

C. Is There a Federal Law Banning Salary History?

The short answer, is “no.”  However, white it’s unlikely to pass given the Republican-controlled Senate, legislators in the House of Representatives have repeatedly introduced a Bill throughout the last decade to eliminate salary history inquiries by prospective employers.  The proposed legislation, entitled the Paycheck Fairness Act, would prohibit employers nationwide from asking job applicants about their salary history and require employers to prove that pay disparities between men and women are job-related.   Rep. Rosa DeLauro (D-Conn.), re-introduced the bill in January 2019. Since its initial introduction in 1997, the law has been re-introduced several times, but has failed to pass both chambers of Congress. Equal pay for equal work, regardless of sex, is a fundamental concept that has been a part of our laws for more than half a century (e.g. The Equal Pay Act), “but women still face barriers to equal pay,” said Rep. Suzanne Bonamici (D-Ore.), during a joint hearing of two U.S. House of Representatives Education and Labor subcommittees on Feb. 13, 2019.   However, many employers today still rely on information about job applicants’ current pay because it provides valuable information about applicants’ experience and performance.

The intent of the Paycheck Fairness Act is to address the gender pay gap by ensuring that low pay doesn’t follow women from job to job and compound over time.   For the immediate future, however, the Bill is unlikely to become law, which means employers will have to continue to navigate the growing patchwork of state, city, and county laws surrounding the issue.

D. Best Practices for Employers

With the rapid growth in technology, employers (even small ones) are increasingly doing business in multiple jurisdictions.  Couple that with the fact that it’s now  increasingly common for employees to work in multiple jurisdictions or even remotely, and you have a recipe for compliance disaster, with employers left to track salary history ban laws that frequently vary from state to state or even city to city.  So what options can employers utilize instead?

  • Stop asking the question. The relationship with a potential new employee should get off to a good start, so don’t put them in the awkward position of having to decide what to reveal about their previous pay. Eliminating salary history questions gives a better impression about the way pay is set at the organization, and it eliminates the need for employers to check each jurisdiction about whether salary history questions are permitted.
  • Price the job, not the person. A candidate’s current salary should have no bearing on what an employer is willing to pay for a particular position. Compensation should be a data-driven decision based on the current value of a given position in the talent market. Certainly, a candidate’s unique skills may place them lower or higher in the pre-determined salary range, but their current salary shouldn’t be the basis for determining their pay.
  • Tweak the process for setting pay expectations. If the reason for asking about salary history is to establish whether a candidate is above the available budget for a position, there are other ways to get to that same answer. Employers could ask about a candidate’s salary expectations for the role. Or they could consider a bold step and simply share the salary range for a position to find out if meets with the candidate’s expectations. They can make clear that the candidate will be placed in the range based on their specific skill set or experience level.

In short, employers have other options and are well advised to begin moving away from using salary history as a metric in their hiring process.  Some jurisdictions already prohibit it, and more are sure to follow.  Eliminating salary history questions not only helps remedy historical pay disparities, it also eliminates the risk that an employer will unknowingly run afoul of a state or city law prohibiting such inquiries and find itself embroiled in litigation rather than spending its valuable time onboarding new talent and growing the business.

 C2 provides strategic HR outsourcing to clients who want to develop optimal workforce strategies and solutions to allow them to be more competitive and profitable. C2 blog posts are intended for educational and informational purposes only.