Past Salary Inquiries: How to Avoid Running Afoul of the Law in a Changing Legal Landscape

How far have pay practices come in the past 55 years?

Remarkably, the most recent census data from 2017 shows that as a group, women still earn just over 80 percent of what men earn. Id. Reasons cited for the continuing discrepancy range from discriminatory pay practices to occupational segregation to the “motherhood penalty.” Paycheck Fairness Act, H.R. 1869, 115th Congress (2017–2018); Fifty Years After the Equal Pay Act; Assessing the Past, Taking Stock of the Future, National Equal Pay Task Force (June 2013). Another reason more recently cited is that women’s past discriminatory wages, when used as a benchmark for future wages, perpetuate discrimination in pay. Asking for Salary History Perpetuates Pay Discrimination from Job to Job, National Women’s Law Center Fact Sheet (June 2017).

Neither Congress nor the Supreme Court has determined under the EPA whether, and to what extent, salary history may be considered in setting an applicant’s pay. The circuits are currently split. The Ninth Circuit ruled recently that consideration of “prior salary alone or in combination with other factors cannot justify a wage differential.” Rizo v. Yovino, 887 F.3d 453, 456 (9th Cir. 2018). On the other hand, the Seventh Circuit found that prior wages are a “factor other than sex,” and therefore, consideration of prior wages does not violate the EPA. See Wersing v. Dep’t of Human Services, State of Ill., 427 F.3d 466 (7th Cir. 2005); Dey v. Colt Construction & Development Co., 28 F.3d 1446, 1462 (7th Cir. 1994) (although the court cautioned that “undue reliance on salary history to explain an existing wage disparity may serve to perpetuate differentials that ultimately may be linked to sex”). In other circuits, such as the Tenth Circuit, employers may consider past salary history without violating the EPA if such salary history is not the sole consideration in determining the prospective employee’s salary. See Angove v. Williams-Sonoma, Inc., 70 Fed. App’x 500, 508 (10th Cir. 2003), citing Irby v. Bittick, 44 F.3d 949, 955 (11th Cir. 1995).

To strengthen the EPA, the Paycheck Fairness Act (PFA) was introduced in the House and the Senate on Equal Pay Day, April 4, 2017. If passed, the PFA would have amended the Fair Labor Standards Act, in small part, to preclude employers from asking about or relying on prior wage history either in considering an employee for employment or in establishing the prospective employee’s wages. Although the PFA did not pass, it would not be surprising to see similar legislation introduced in the future, particularly with the change in party control in the House of Representatives.

Despite the lack of movement at the federal level, to curb potential continued discriminatory pay practices, states and municipalities increasingly are enacting laws to prevent employers from seeking or using a prospective employee’s past salary information. The general theory behind these laws is that if an employer does not know about a prospective employee’s past salary, the employer cannot use that past salary to perpetuate past discriminatory pay practices. Although the laws are varied in their scope and application, thus far, Puerto Rico and at least 10 states—including California, Connecticut, Delaware, Hawaii, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, and Vermont—have passed laws precluding at least some types of employers from asking about pay history. In addition, several municipalities and counties—including Chicago; Kansas City; Louisville; New Orleans; Albany County and Westchester County, New York; New York City; Philadelphia; Pittsburgh; and San Francisco—have passed similar laws. Comparable legislation has been introduced in other states like Colorado, but has not yet passed. Interestingly however, two states—Michigan and Wisconsin—enacted laws preventing local governments from enacting salary history bans. See Mich. Comp. Laws § 123.1384; Wis. Stat. § 103.36. In fact, Wisconsin’s statute explicitly permits employers to solicit such information. Wis. Stat. § 103.36(1).

What can employers do to avoid running afoul of these new laws?

Although it is still legal in many jurisdictions for employers to inquire about an applicant’s past salary history, employers that want to avoid running afoul of the law in those jurisdictions where such inquiries are prohibited should consider revising their current hiring practices as needed to avoid potential liability. To comport with salary inquiry bans, employers are advised to consider the following as part of their regular hiring practices:

• Avoid asking an applicant, or the applicant’s current and former employers, about the applicant’s compensation history, either through a written application or through the interviewing process.
• Determine a compensation range for each position prior to seeking applicants for the job. Set objective and neutral hiring criteria for each position, considering factors such as the duties required for each position and the experience required to meet the job requirements.
• Change any salary-setting formulas to exclude prior pay as a factor in the employer’s pay-setting standards.
• Maintain detailed documentation during the hiring process, including factors the employer considered in setting an employee’s starting pay, information the employer provided to the applicant regarding the position, and information the prospective employee voluntarily provided the employer during the hiring process.

Although these practices are helpful in all jurisdictions with salary history bans, the laws with respect to the consideration of salary history vary from jurisdiction to jurisdiction. Some laws apply only to public-sector employers. Others allow an employer to verify past salary after an offer that includes the terms of compensation has been extended. Some will allow an employer to consider past compensation if the prospective employee volunteers the information. Others specifically preclude retaliation against an employee for exercising the employee’s rights under the law. Thus, it is important for employers to understand the specific nuances of the law in the jurisdictions in which they operate. Regardless of whether their jurisdiction precludes consideration of pay history in setting compensation rates, employers should monitor and evaluate their pay practices regularly to ensure that they comply with the EPA.