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The Salary History Ban: What Employers Need to Know

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As part of an effort to eliminate the gender and racial wage gap, cities, states and territories around the U.S. are banning employers from asking for a job candidate's pay history. This is important for employers, especially those doing business in a jurisdiction that is instituting or considering a version of the ban.

State and local legislators are discussing, introducing and passing Salary History Inquiry (SHI) bans to address what they have identified as ongoing pay inequality on the basis of gender, race and other protected categories in an effort to prevent further perpetuation of the same via questions about the salary histories of prospective employees. Many of these bans are specifically designed to combat what lawmakers view as gender and minority based pay inequities which may otherwise continue over the course of a worker’s career.

Some laws go further than merely banning pay history questions. A few also prohibit an employer from relying on an applicant's pay history to set compensation if discovered or volunteered; others prohibit an employer from taking disciplinary action against employees who discuss pay with coworkers.

Note that several of these SHI bans have or will take effect but contain “safe harbor” provisions preventing the imposition of penalties until a later date. For example, Puerto Rico’s law was effective March 8, 2017 but no penalties will be imposed until March 8, 2018. Oregon’s SHI ban took effect October 9, 2017 but penalties won’t be issued until January 1, 2024. And, while San Francisco’s law takes effect July 1, 2018, no penalties will come into play until July 1, 2019.

What employers need to know

So what do employers need to know in order to ensure their compliance? Here are some frequently asked questions to help navigate the legal implications of the ban where it exists.

What is considered an “inquiry” in the context of SHI Bans?
The term generally refers to the communication of any question or statement to an applicant, an applicant’s current or former employer, or a current or former employee or agent of the applicant’s current or former employer (in writing or otherwise) for the purpose of obtaining an applicant’s salary history. In certain jurisdictions with SHI bans “to inquire” also includes an employer’s search of publicly available records or reports for the purpose of obtaining an applicant’s current or former compensation data.

Is it okay for an applicant to voluntarily provide a prospective employer with salary history data?
The state and local SHI bans enacted to date do not prohibit employers from receiving salary history data which is “knowingly and willingly” provided or “voluntarily and without prompting” disclosed by applicants. This information is often volunteered by candidates in response to permissible inquiries regarding their salary requirements and/or expectations. Salary history may also be disclosed by an applicant in response to an employer’s permissible disclosure of the salary range for a position.

Can an applicant’s salary be discussed or negotiated in any way without violating SHI Bans?
There are a number of ways in which the issue of salary can be discussed with an applicant without running afoul of SHI restrictions. As noted above, state and local SHI bans do not prohibit employers from receiving salary history data which is voluntarily provided by an applicant (i.e. – without any prompting from the prospective employer). Once such a disclosure occurs, whether in response to an employer’s general inquiry as to the candidate’s salary requirements or upon communication of the salary range for the position sought, some level of discussion and negotiation may occur. Even the strictest of the SHI bans enacted to date allow a prospective employer to engage in discussions with an applicant as to salary, benefits and other compensation expectations, including any unvested equity, deferred compensation or other benefits an applicant would forfeit by leaving a current employer.

If an applicant voluntarily discloses salary history data what steps can be taken to confirm it?
Certain state and local SHI bans enacted to date do permit employers to confirm salary history data voluntarily disclosed by an applicant. However, as a best practice, it is recommended that our recruiters, HR professionals, hiring managers and third-party vendors (e.g. – background check providers) refrain from seeking and/or attempting to confirm an applicant’s salary at any point in the hiring process.

What types of damages and penalties may be awarded or imposed for violating SHI Bans?
There is a wide range of damages and penalties for violating the state and local SHI bans enacted to date, each of which is significant. New York City’s ban, for example, allows a claimant (i.e. – an applicant purportedly denied hire in association with a prospective employer’s salary history inquiry) to file a discrimination complaint with the City’s Commission on Human Rights seeking an award of compensatory and punitive damages, as well as attorneys’ fees and costs.

Moreover, the Commission itself may impose a civil penalty of up to $125,000 for an unintentional violation, and up to $250,000 for a “willful, wanton or malicious act” which violates the City’s SHI ban. Under Delaware’s ban, the state’s Department of Labor (the DDOL) has the right to enforce and impose civil penalties of $1,000 to $5,000 for an initial violation and $5,000 to $10,000 for each subsequent violation. Notably, multiple claimants in any jurisdiction with a SHI ban in place could opt to pursue class action litigation.

What specific steps may be taken by recruiters, HR professionals and hiring managers to ensure compliance with state and local SHI Bans?

  • Review existing recruiting and onboarding policies, practices and procedures to ensure compliance with the specific provisions and prohibitions set forth in these FAQs.
  • Review existing job applications to ensure those documents do not contain any requests for applicants to disclose their salary histories during the hiring process.
  • Train and/or provide FAQs to recruiters and other personnel involved in interviewing and onboarding to ensure they are not asking (or otherwise prompting) candidates to disclose salary history. Recruiters should be trained to focus on an applicant’s salary requirements and expectations versus salary history, emphasizing that the Company sets pay commensurate with experience.
  • Refrain from any conduct which could be construed as a refusal to hire an applicant based upon his or her failure to provide salary history (in an effort to avoid any claims of retaliation).
Want to learn more about salary history bans and how to avoid legal exposure? Contact Aerotek now.

Access part two, Salary History Ban Compels Need for More Market Wage Intelligence.