AccuSource Blog

Updating Hiring Practices in Light of Salary History Bans

In effort to close gender pay gaps, state and local legislatures prohibit employers from inquiring about past pay history

Women continue to earn approximately eighty cents to each dollar earned by their male counterparts in the same or similar roles. Many state and local legislatures are attempting to bridge this gap by prohibiting employers from asking candidates about their past salary history prior to extending an offer of employment. Ideally, the concept of banning the salary question from the interview process is to  compel employers to base their compensation packages on an applicant’s individual aptitude and skill, as well as the average market rate and value to the organization, as opposed to the individual applicant’s salary history which, on average, is disproportionately lower for women. In short, basing the new hire’s salary on their historic wages often has the effect of further perpetuating the gender pay gap.

 According to a survey, while many executives believe legislation banning questions on pay history will impact on their organization’s hiring processes, they do not agree it will actually aid in closing the gender pay gap. While only a handful of states and municipalities have enacted salary ban legislation, many expect new legislation to be a growing trend and are working to update their organization’s hiring practices to stay ahead of the curve. “It’s a new game out there,” said Tom McMullen, Senior Client Partner in Korn Ferry Hay Group’s Reward and Benefits group. “Few large organizations will be exempt. It’s better to be prepared than to be caught by surprise on this.” The potential penalties for infractions vary depending on location. For example, failure to adhere to New York City law is considered a violation of the city’s human rights law and carries a fine of up to $250,000, while Delaware’s legislation bears civil penalties of up to $10,000 for each infraction.

Currently, employers can still ask candidates about their compensation expectations. For example, it is still ok for employers to ask, “What are your expectations with respect to base salary, bonus or benefits?” or “What is your desired compensation?”  By framing the conversation around compensation expectations, employers can better understand what the candidate is looking for and  ensure there is a match with the pay for the position.

Employers will need to keep abreast of this growing new legislation as labor and employment laws are continuously evolving on federal, state, and local levels. Tips on remaining compliant from the Society for Human Resource Management (SHRM) include:

  • Make sure your entire hiring team is aware of new legislation
  • Align salaries to a new employee’s organizational value – not to their wage history
  • Conduct competitive market analyses and stay up-to-date on salary market rates
  • Train hiring and management personnel and document the process
  • Modify all paperwork to comply with salary question ban legislation to ensure there is no reference to salary history

 

Below is a list of current legislation regarding salary history from SHRM:

California—The Golden State’s law is more comprehensive than those in other jurisdictions, banning employers or their agents (such as temp agencies and outside recruiters) from seeking salary and benefits information. An exception is made for salaries that are disclosable to the public under state and federal freedom of information laws. Effective Jan. 1, 2018.

Delaware—Companies cannot ask applicants or their former employers for salary histories and cannot conduct salary-based screening of job applicants to make sure previous compensation meets minimum or maximum amounts. Effective Dec. 14, 2017.

Massachusetts—As part of a broader new law aimed at equal pay for equal and comparable work, the Bay State bans organizations from seeking information about an applicant’s past pay. However, employers may confirm salary information if offered voluntarily by the applicant, and after an offer of employment with compensation has been made. Effective July 1, 2018.

Oregon—Employers are barred from taking a person’s current or previous salary into account when screening applicants or determining their salaries. Companies may ask about a person’s salary history after making a job offer, including a specific level of pay. Most of the law’s provisions become effective on Jan. 1, 2019.

Puerto Rico—Employers may not ask about salary history unless an offer has been extended. Effective March 8, 2017.

New York City—Companies cannot ask about past salary, nor base wages on pay history at any phase of the employment process, unless the applicant reveals the information willingly. The statute applies to all employers, even those with just one employee. While the law does not cover public jobs subject to collective bargaining agreements, a separate mayoral directive bars city government agencies from inquiring about a candidate’s salary history. Effective Oct. 1, 2017.

San Francisco—Employers cannot ask about past salaries or release pay information to another San Francisco employer without the worker’s written permission. Effective July 1, 2018.

In January, a number of jurisdictions banned the question for public-sector applicants only: In Pittsburgh, the law applies to city employees; in New Orleans, it covers city workers and contractors; and in New York state, it encompasses state job applicants.

 

This information is not intended to be legal advice. It is recommended that you speak with your Legal Counsel to ensure compliance with applicable law.

 

For more news on salary history bans and general compliance in regards to hiring practices, see the links below:

 

AccuSource is a one-stop shop for all of your pre-employment background screening needs. For concierge-level customer service and an "all-in" approach to providing you with tailored solutions, trust AccuSource.

Request Information 

FILED UNDER: News, Compliance, Salary
Luke Runnells

Luke Runnells

Interested in learning more? Click here or call us at 888.649.6272 today! 

   Learn More   

Subscribe to Receive Blog Updates

Human Resources Today