Hiring in the age of salary history bans
Correction: A previous version of this article stated that Oregon's salary history ban was not yet in effect. It took effect in October.
Across the country, state and local governments are enacting new laws that prohibit employers from requesting salary information from job applicants.
The laws are an effort to reduce pay inequity, particularly for women and minorities. In theory, workers who have experienced pay discrimination will continue to do so in potential jobs if the salary offered is based on previous earnings, thus continuing the cycle of discrimination.
Some of the law merely forbid employers from asking about salary history, but some prohibit employers from using that information to set pay even if they discover it inadvertently.
Where are the bans?
Nine jurisdictions have adopted bans that apply to private employers, as discussed below. New York state, New Orleans and Pittsburgh have restrictions that apply only to public employers. The governors of both New Jersey and Illinois have vetoed salary history bans, but a veto override appears likely in Illinois, according to law firm Littler Mendelson.
Philadelphia was the first to enact such a law but it has been temporarily stayed until a legal challenge is resolved. The lawsuit, filed by a local business group, could serve as a test case for other laws around the country.
If the law takes effect it will prohibit employers from requesting salary history and from basing compensation on the information, even if the applicant volunteers it.
California’s governor signed the state's law into effect last month. It prohibits employers from seeking a candidate’s pay history and from basing pay on salary history information if an employer has access to it or if an applicant volunteers it. Where reasonable, employers are required to provide a pay scale to applicants. The law takes effect January 1, 2018.
New York City
Employers are prohibited from asking about or conducting searches for salary history. They are permitted to consider voluntarily received salary information to determine compensation. The requirements took effect Tuesday.
Employers are prohibited from screening applicants based on past compensation and from asking about salary history. They may, however, confirm that information after an offer is extended. Delaware's ban takes effect December 14.
Employers cannot request salary history information and, if volunteered, previous pay cannot be a defense to a pay discrimination claim. The law takes effect July 1, 2018.
The law prohibits employers from requesting salary history and from using that info (if otherwise known) to set pay. While California has similar requirements, employers in San Francisco must ensure they're also following the local rules, which have their own posting requirements, for example. The law takes effect July 1, 2018.
Employers are barred from requesting information about past compensation until a job offer is made and may not base pay on past compensation. The law took effect in October.
Employers may not ask about a job applicant's pay history. The law took effect in March.
Albany County, New York
Employers may not screen job applicants based on their wages or request or require as a condition of being interviewed, or as a condition of continuing to be considered for an offer of employment, that a job applicant disclose prior wages or salary history. The law takes effect this month, unless vetoed, according to law firm Littler Mendelson.
The upside to the legislation is fairness for candidates. Proponents of these laws say that businesses should focus on the value of work on the work itself, employees' experience and performance, as well as market factors that drive salaries.
For some in HR, the logic behind the legislation is understandable. “The intent is that previous employers might have used discriminatory practices in establishing that pay rate or salary so future employers will stop that cycle,” says Derek Jones, deputy VP of business development at Deputy, a workforce management company.
And recruiters are already adapting. “What we're seeing are more recruiters posting salary ranges on external job posting or covering this in the first phone screen," Jones said. "This level of transparency can benefit recruiters from wasting time with candidates who make it to a phone screen only to be disqualified for being out of that range."
While recruiters may be able to shift gears easily in the wake of these laws, the brunt of the compliance challenges may fall on employers, because they have to set those salaries.
This is especially true for businesses in California, which will have to provide job pay scales upon request. "That disclosure requirement, coupled with the restriction on using salary history to justify an increase in compensation, is likely to lead to more structured compensation practices," says Margaret Keane, partner with DLA Piper
Many employers don’t have formal pay scales and job grades or even particularly well-defined compensation parameters for a position, even when they solicit applications, Keane told HR Dive.
Negotiations will have to change, too, says Veronica Valenzuela, HR manager at CPS Security.
“Before we post an opening, we conduct a salary analysis to see where the market is for a specific position. We’re pretty transparent when we post our openings, including the salary range in ads," she said. "But asking about salary history saves time, helps determine the candidate’s salary expectations, and helps with negotiations. Applicants already know how much the position is paying, but that doesn’t mean we won’t be flexible if they’re seeking higher compensation."
In addition, complicated situations are sure to arise when an applicant volunteers information or when a highly sought-after candidate won't accept the employer's pay range. Mergers and acquisitions are sure to present unique challenges, too.
“Employers adding to the workforce through mergers and acquisitions will need to be cognizant of compensation differences between existing and new employees performing substantially similar work under similar working conditions," Keane said. "Addressing disparities rooted in different cultures will be a new challenge for HR professionals in the integration phase and will require a clear evaluation of how experience, performance, and productivity factor into compensation in a given role."
To do today
If you're subject to any of these laws, the first and simplest thing to do is remove questions on print and online applications that request compensation history. But the more difficult shift — and the biggest area of risk — will be training for managers. HR needs to train these individuals quickly, Jones said.
They'll no longer be able to ask any questions about previous pay, including commissions and, in some cases, benefits. Instead, hiring managers will need to ask more generic questions, about employees' earning expectations, for example. Employers will have to ensure that outside recruiters do the same; in Delaware, for example, employers can be held responsible for recruiters' violations unless they've provided such instructions.
Finally, as Keane noted, employers will likely have to create a salary range for each position and ensure that the variations within those ranges are based on things like merit, education and experience.
Whether or not your jurisdiction is covered by the new laws, the trend seems to be taking hold. Similar measures are under consideration in a number of jurisdictions, and it may only be a matter of time before more join this growing list.