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.

FLSA Misclassification: Hourly-Exempt Employees

FLSA Misclassification- Does your company classify some employees as “hourly exempt?” That is, are some of your employees paid an hourly rate of pay for all hours worked, yet do not get paid overtime for hours worked in excess of forty (40) per workweek? If so, your company should take a long, hard look at whether those employees are classified correctly.

The “hourly-exempt” category is a combination of a few different overtime exemptions under the Fair Labor Standards Act (“FLSA”). Most employers understand that professional positons such as doctors, lawyers, business owners, and teachers may be paid on an hourly basis and not be paid overtime for the extra hours they work. The most common mistake comes within another recognized FLSA exemption: the computer employee exemption.

Under the FLSA’s computer employee exemption, a “computer employee” can be paid either on a salary basis or on an hourly basis and be exempt from overtime. But problems often arise because employers assume, incorrectly, that any employee who uses, repairs, or needs computer software to perform their job qualifies for this exemption. In truth, the computer employee exemption is quite narrowly defined by the FLSA, and the U.S. Department of Labor frequently catches employers in misclassification errors during audits or complaint investigations. To qualify for the exemption, all of the following criteria must be met:

  • The employee must be compensated either on a salary or fee basis at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour ($41.00 per hour for California employees);
  • The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;
  • The employee’s primary duty must consist of:
  1. The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
  2. The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
  3. The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
  4. A combination of the aforementioned duties, the performance of which requires the same level of skills.

The computer employee exemption does not include employees engaged in the manufacture or repair of computer hardware and related equipment. Employees whose work is highly dependent upon, or facilitated by, the use of computers and computer software programs (e.g., engineers, drafters and others skilled in computer aided design software), but who are not primarily engaged in computer systems analysis and programming or other similarly skilled computer-related occupations identified in the primary duties test described above, are also not exempt under the computer employee exemption.

More information on the FLSA’s computer employee exemption can be found here: http://www.dol.gov/whd/overtime/fs17e_computer.pdf. Learn more about C2’s Federal Regulation services.