Most employers currently ask job applicants for their salary histories. This is a reasonable question, and one that employers find useful to help attract and retain talented employees. Given recent legislative initiatives and judicial decisions on this topic, however, employers should tread carefully.
In the past few weeks, both the state of Oregon and New York City have joined a growing list of jurisdictions that restrict employer inquiries into job applicants’ salary histories. Other states include California and Massachusetts, while other notable cities include Philadelphia, New Orleans, and Pittsburgh. At least 20 other states and many other cities are considering similar legislation. Several of these laws impose fines on employers for violations, and some even include potential jail time.
By way of example, the New York City law, which took effect last month, makes it an “unlawful discriminatory practice” for employers: (1) “to inquire about the salary history of an applicant for employment;” or (2) “to rely on the salary history of an applicant in determining the salary, benefits or other compensation for such applicant during the hiring process, including the negotiation of a contract.”
“Salary history” is broadly defined to include an applicant’s “current or prior wage, benefits or other compensation.” This concept does not, include, however, any “objective measure of the applicant’s productivity, such as revenue, sales or other production reports.” “Inquiry” is likewise broadly defined as “any question or statement to an applicant, an applicant’s current or prior employer, or a current or former employee or agent of the applicant’s current or prior employer, in writing or otherwise, for the purpose of obtaining an applicant’s salary history.” The inquiry restriction includes searching publicly available records.
Even for employers who operate in jurisdictions that do not prohibit salary-history inquiries—such as Ohio—other laws may limit the extent to which such information may be used in determining compensation. According to the Sixth Circuit Court of Appeals (which includes Ohio, Michigan, Kentucky, and Tennessee), for example, the federal Equal Pay Act prohibits employers from relying on salary history as the sole justification for paying two otherwise-equal employees differently, particularly if those employees are different genders.
With these issues in mind, multi-state employers should ensure that they do not run afoul of any state or local laws regarding the procurement or use of salary history. Additionally, all employers should also be cautious when considering salary history as a lone or significant factor in setting compensation, particularly in light of the potential for perpetuating gender pay disparities. Employers should, at a minimum:
- Avoid relying on salary history as the lone determination of starting pay;
- Periodically review compensation practices to ensure non-discriminatory and equitable treatment;
- Document market factors that contribute to any discretionary determination of starting pay, including the individual’s education, prior experience, special skills, and expertise, individual negotiations by the candidate, market factors, and other job-related factors; and
- Comply with state and local laws regarding salary history inquiries and use of prior salaries in making compensation determinations (and stay abreast of increasing changes).