Salary History Bans Gain in Popularity

Salary History Bans Gain in Popularity

Staying abreast of all the HR changes taking place in different jurisdictions around the country can be daunting – particularly for companies with offices in multiple jurisdictions.  Every new state law, it seems, is in response to a social or political movement that takes on a life of its own, and often a name of its own.  Changing employment laws have been part and parcel of such recent movements as #metoo, ban-the-box, pay equity, and salary history bans.  It can all be a little confusing.  No wonder one of C2’s clients phoned recently to ask for clarification about salary history bans and how to determine whether and to what extent it needed to adjust its HR practices.

A.  The Evolution of Salary History Bans

Ever since the enactment of the Lily Ledbetter Fair Pay Act in 2009 (“Lily Ledbetter”), the drive to equalize pay among men and women performing the same job has been at the forefront of our collective HR consciousness.  The push for equal pay has spawned a “sub-movement” known as salary history bans, which focuses on eliminating salary history questions from employment applications or the interview process.  The rationale for eliminating these questions is that they allow employers to base their employment decisions, at least in part, on how much candidates earned at previous jobs, which perpetuates pay inequality because women have historically been paid less than their male counterparts for the same work.  In keeping with the spirit of Lily Ledbetter, and other federal predecessors such as the Equal Pay Act (“EPA”) of 1963 and the Fair Labor Standards Act (“FLSA”), many states are now enacting laws that limit or completely restrict employers’ ability to collect candidate salary history, making it illegal for employers to ask candidates to list their current and previous salaries.  As a result, hiring managers and recruiters have to reexamine how to carry out those wage conversations and whether information concerning a candidate’s compensation history can be obtained and, if so, at what stage of the hiring process.

B.  Slow Progress Continues

While the EPA certainly drew a line in the sand regarding pay discrimination based on sex, some would argue its protections failed to alter the pay disparity landscape in the decades since by poor enforcement, a lack of recoverable damages, and other economic factors.  At the time the EPA was signed into law by President Kennedy in 1963, women for example were making roughly 60 cents on the dollar as compared to men.  Fast forward to today, a recent report from the Department of Labor Statistics indicates women earn close to 90 cents on the dollar, as compared to men.  Gender pay disparity has historically risen as compensation increases.  Women are understandably frustrated with being unable to completely close that pay disparity, which has driven various states to enact their own laws – one popular one being bans on inquiring about candidates’ salary history, so that historical pay discrimination is not perpetuated to younger generations.

C.  Coming to a State Near You

Recently, Virginia, Governor Ralph Northam removed salary history questions from state government employment applications.  Perhaps this is an indicator Virginia is gearing up to require private sector employers from collecting salary history as well.  As more states and cities continue to ban salary history, employers should pay particularly close attention to the states in which they have employees in order to ensure their own application and hiring processes are compliant.

As it stands currently, the following jurisdictions have instituted in part or altogether a ban on questions regarding candidates’ compensation history:

 

Salary History Bans

 

D.  A One Application Solution?

Jurisdictions that have adopted salary history bans have done so to varying degrees.  Some just require removing the salary history question from pre-screening questionnaires or the employment application.  Some allow employers to inquire into salary history only after a conditional offer of employment has been made; and some completely prohibit the question during the hiring process.

To help ensure compliance across differing state laws, savvy employers have established their own internal processes and forms that are suitable for use in all jurisdictions. Federal contractors for example tend to be in a unique situation in that they’ve already negotiated labor rates with the government prior to staffing the contract with employees.  As a result, some hiring managers connected with those programs lead with a “take it or leave it” approach when discussing salary with candidates: “this position pays X and is non-negotiable, does this work for you?”  Other corporations have instituted pay banding, which creates specific ranges for each job based on skills, experience, education/certifications, which helps eliminate the need to know a candidate’s salary history. Pay banding also provides a benchmark at the point of entry for the employee and maps out their career path, at least from a salary perspective.  Still other companies have re-framed the salary history question to instead ask the candidate to provide their “salary expectations” for the job to which they are applying.

Regardless of the specific law, the common theme among salary history bans appears to be that salary history questions are not allowed on an initial questionnaire or application.  At a minimum then, employers would be smart to go ahead and revise their initial job application or questionnaire to remove questions regarding salary history.  While they will still need to be aware of the nuances of a state’s salary ban law, at least removing those questions from the initial forms helps start off the hiring process in a compliant fashion.

E.  Employer Takeaway

As state legislatures continue to build upon the patchwork of salary history bans, employers will have to think creatively and revamp their own internal processes to stay compliant.  Whether it involves changing forms, policies, or practices (or some combination thereof), employers must be prepared to adjust on the fly to meet the changing laws in this area.

 

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.