Pay Equity Laws: Banning Salary History Questions

Philadelphia
In January 2017, Philadelphia Mayor Jim Kenney signed Philadelphia’s wage equity bill, making Philadelphia the first city to enact a law prohibiting employers from requesting a prospective employee’s salary history. While Philadelphia’s salary history ban is currently on hold pending a legal challenge, it is illustrative of a wider trend.

The law is based on findings that women, particularly women of color, in Pennsylvania are paid less than men. The wage equity law aims to place the burden on employers to decide what a job is worth, as opposed to putting the burden on applicants to reveal their previous salary and potentially undercut their pay in a new job.

Under the new law, employers and employment agencies are prohibited from not only inquiring about a prospective employee’s wage history but also conditioning a prospective employee’s employment or consideration for an interview on the disclosure of that person’s wage history. Furthermore, Philadelphia employers and employment agencies are prohibited from retaliating against a prospective employee for failing to comply with any request for wage information.

Employers are required to prominently post any notice of the law’s provisions prepared by the Philadelphia Commission on Human Relations. Individuals can file a complaint with the Philadelphia commission for any violation of the law’s provisions within 300 days of an alleged violation. The commission can then order injunctive or other equitable relief, compensatory damages, punitive damages not to exceed $2,000 per violation, and payment of reasonable attorney fees and costs. If the commission dismisses an individual’s complaint or does not enter into a conciliation agreement within one year, the individual may bring an action in the Court of Common Pleas of Philadelphia County for relief, including attorney fees and costs.

New York
Governor Cuomo continued New York’s foray into fair pay concerns by issuing two executive orders.

Executive Order No. 162 directs state agencies on or after June 1, 2017, to require contractors and subcontractors to provide a detailed workforce utilization report that includes the job title and salary of each employee of the contractor performing work on the government contract. The information must then be reported to state agencies and authorities on a quarterly basis for all prime contracts having a value in excess of $25,000 and on a monthly basis for all prime construction contracts having a value in excess of $100,000.

Executive Order No. 161 prohibits state entities from asking prospective employees for their current compensation, or compensation history, until a conditional offer of employment that includes the compensation offered for that employment has been provided to the applicant. Once an offer is made, the entity may request compensation information and verify it. The cities of Pittsburgh, Pennsylvania, and New Orleans, Louisiana, have passed similar laws affecting only state agencies.

San Francisco and California
San Francisco’s salary history city ordinance goes into effect in July 2018 and restricts employers from (1) considering an applicant’s salary history in determining whether to make an offer of employment or what amount of salary to offer, (2) inquiring about salary history, (3) retaliating against an applicant that declines to provide salary history, and (4) releasing a current or former employee’s salary history to a prospective employer without written authorization. Notably, the restrictions in the San Francisco ordinance, like similar laws in New York City, Massachusetts, Oregon, and Puerto Rico, also prohibit an employer from conducting a search of publicly available records to obtain salary history information. Importantly, however, these laws do permit employers to (1) consider an applicant’s salary history if the applicant voluntarily discloses such information and (2) discuss an applicant’s salary expectations as they relate to the applicant’s current employment.

California has a statewide restriction, effective January 2018, not only banning employers, as well as their recruiting agencies, from considering salary history or seeking it directly from an applicant but also mandating that employers provide job applicants with the pay scale for a position upon request. The California law is less burdensome than the San Francisco ordinance because it contains an exception permitting employers to seek and consider publicly available salary history information.

Delaware
Delaware’s compensation history ban went into effect in December 2017. The Delaware ban is slightly broader than most because it bans employers from inquiring about an applicant’s “compensation,” which includes salary as well as benefits and other forms of compensation.

Additionally, liability for the ban applies even where an applicant uses an outside recruiter. While the applicant may discuss compensation expectations with the employer or its agent, an outside recruiting company, the applicant cannot be required to disclose compensation history. Delaware does provide employers with a tool to avoid liability if they can demonstrate that their agents were specifically directed to comply with the ban.

Takeaway for Employers
While a small minority of states has pushed back against this pay equity trend—for example, governors in New Jersey and Illinois recently vetoed bills banning questions about salary history—the new laws in many areas of the country make it clear that states and localities will continue to proffer their own, individualized pay equity laws in 2018.

This patchwork of new laws will create challenges for multilocation employers that seek uniform hiring and pay practices. The complexity of these laws will make compliance a challenge, especially as the laws are interpreted by courts and evolve. Not only must employers understand compliance issues with the multiple state and local regulations, but they also must actively adapt to court decisions that give meaning to those rules.

Best practices for employers include regularly reviewing their pay policies and engaging in attorney-client privileged audits of their employee compensation structure to ensure compliance with recent developments. An additional benefit for employers in Oregon and Massachusetts is that the salary history laws specifically enable employers to minimize potential liability for compensatory and punitive damages if they conduct an internal “pay equity” audit of their compensation practices. Employers should also conduct training of any personnel involved in the hiring process to ensure consistency with state or local laws. Regarding background checks and screening, employers should ensure that third-party background screening companies and outside recruiters do not ask for or provide salary history information. Additionally, employers should consider not basing a new hire’s pay level solely on prior salary; instead, personnel involved in hiring should use factors such as market value, industry, and geography to establish an applicant’s pay level.

Although the new laws place not only challenges but also burdens on employers, this legislation should be viewed in a positive light: the pay equity trend is an opportunity for employers to be leaders in combating potential discrimination in the workplace.

Amber Rogers is a partner at Hunton & Williams LLP in its Dallas, Texas, office.

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