Tag Archives: Salary History

Changes in the Air – Employers Considering Prior Salary When Setting Wages Need to Know the Applicable Laws

Contributed by Michael Wong, April 18, 2018

The Equal Pay Act can create significant exposure for employers, if not considered when setting female employees’ wages – especially if you are relying upon a female applicant’s prior salary history and there is a difference in the pay of similar male employees.

33186296 - wage gap concept with blue figure symbolizing men and red pawn women

Wage gap concept with blue figure symbolizing men and red symbolizing women

The Equal Pay Act is dangerous for employers because plaintiffs are not required to prove discriminatory intent by the employer. All a plaintiff must show is that there is a wage disparity for equal work requiring the same skill, effort and responsibility, which is performed under similar working conditions. Once a plaintiff establishes that, the burden shifts to an employer to establish that the difference is based on one of the following four statutory exceptions:

  • a seniority system;
  • a merit system;
  • a system which measures earnings by quantity or quality of production; or
  • a differential based on any other factor other than sex.

Historically, the Equal Employment Opportunity Commission (EEOC) and the federal Appellate Courts for the Second (Connecticut, New York and Vermont), Eighth (Arkansas, Iowa, Minnesota, Missouri, Nebraska, South Dakota and North Dakota), Tenth (Colorado, Kansas, New Mexico, Oklahoma, Utah and Wyoming) and Eleventh (Alabama, Florida, and Georgia) Circuits have taken the position that employers may consider prior salary as a mix of factors to set female employee wages without violating the Equal Pay Act – but prior salary cannot be the sole factor for any wage differential with a male employee in a similar role. On the other hand, the Seventh Circuit (Illinois, Indiana and Wisconsin) has held that using prior salary alone is a basis other than sex for wage differential that does not violate the Equal Pay Act.

Recently, the U.S. Court of Appeals for the Ninth Circuit (California, Alaska, Arizona, Hawaii, Idaho, Montana, Nevada, Oregon and Washington) took its prior decisions a step farther by finding that prior salary does not fit within the exception of a factor other than sex because it is not a legitimate measure of work experience, ability, performance, or any other job-related quality. In doing so, the Ninth Circuit held that allowing employers to consider prior salary would simply continue the gender-based assumptions and discrimination that the Equal Pay Act was intended to stop.

This recent decision falls in line with the increasing number of state and local laws being passed that prohibit employers from asking applicants for prior salary information. States and cities/municipalities that currently have laws prohibiting employers from requesting/considering prior salary information include the following:

  • California (all employers)
  • Massachusetts (all employers)
  • Oregon (all employers)
  • Delaware (all employers)
  • New York (state employers)
  • New Jersey (public employers)
  • Puerto Rico (all employers)
  • San Francisco (all employers)
  • New Orleans (city positions)
  • New York City (all employers)
  • Albany County, New York (all employers)
  • Philadelphia (all employers – currently subject to legal challenge)
  • Pittsburgh (city positions).

With these changes you need to be aware of the laws impacting your operations and if you want to request and/or consider prior salary history when setting wages. If you are not sure, seek legal counsel in reviewing your employment practices.

 

UPDATED: California Bans Applicant Salary History Inquiries

Contributed by Noah A. Frank, November 8, 2017

Add salary history to the growing list of topics that may be off limits on employment applications and during interviews, depending on where your business operates.

32420632 - law gavel on a stack of american moneyCalifornia joins a growing list of jurisdictions banning salary history inquiries. On October 12, 2017, California Governor Brown signed Assembly Bill 168, which prohibits employers from seeking or relying upon applicants’ salary history and using such information as the basis for establishing compensation. The new law takes effect on January 1, 2018.

Like ban-the-box legislation (banning inquiries into criminal conviction history) and sick leave ordinances, this is likely the start of a national trend enacted on a jurisdiction-by-jurisdiction piecemeal basis.  California joins Massachusetts, Oregon, and Delaware, along with several municipalities, such as New York City, Philadelphia, Pittsburgh, and U.S. territory Puerto Rico, to enact such legislation in an emerging national trend.  Indeed, since we reported on Illinois’s forestalled HB1462 amending the Equal Pay Act in September, the Illinois House has overridden the governor’s veto, and the bill is on its way to the Illinois Senate for similar consideration.

The Basics

Like the other jurisdictions’ laws, California’s legislation is meant to remedy past gender-based compensation discrimination.  However, given the broad language, this bill will apply to all protected classes such as (and not limited to) race, religion, military status. Under AB-168, all employers in the state of California:

  1. May not inquire directly or indirectly into an applicant’s compensation and benefits (unless publicly available as provided by other laws).
  2. May not rely on salary history as a factor in determining whether to offer employment to an applicant or what salary to offer an applicant.
  3. Must provide the pay scale for the position to an applicant applying for employment “upon reasonable request.”  Note that this is a fairly unique provision in California’s law (at least for now).
  4. May not allow prior salary alone to justify any disparity in compensation.

Notably, if an applicant “voluntarily and without prompting discloses” compensation history, the employer may then consider it as a factor in determining the salary to offer an applicant.

Compliance Made Easy

In light of these trends in the workplace, employers must ensure that they are compliant with new and emerging laws as enacted, and to also perform routine audits – including employment forms, handbooks, policies, and templates.  As it relates to these salary inquiry laws, employers should (1) ensure job applications are compliant and do not include salary/wage inquiries, and (2) review interview questions, especially “scripts” used by management, and ensure that those conducting interviews are aware of the new unlawful inquiry.

What’s the Bottom Line on Salary History Inquiry Bans? Don’t Ask.

You may not ask applicants “how much do you currently make?” But you may ask: “how much would you like to earn in this position?” or “What are your compensation expectations?” or other similar future-oriented inquiries.