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How to Comply with Salary History Bans—Here, There, and Everywhere

September 06, 2019 By Julie Kramer - Leave a comment

how to comply with salary history bansTracking salary history bans is like playing a game of Whac-a-Mole. As soon as you master the law in one jurisdiction, another one pops up. To date, 18 states and 19 counties and cities have passed these laws, which prohibit employers from requesting salary history data from job applicants. Unfortunately, this growing patchwork of legislation creates compliance challenges for employers on several levels.  

For one thing, each law is unique, so multi-state businesses have multiple laws to follow. For another, those who’ve routinely asked candidates for salary data in the past—and who hasn’t?—must rework their job applications and related hiring policies, while requiring staff to build new hiring habits overnight.   

Furthermore, the list of bans is expected to keep growing. In order to maintain compliance, employers must not only stay abreast of the legislation but ensure they have controls in place for complying with each one correctly.

Salary History Bans in a Nutshell

More than fifty years after the passage of the Equal Pay Act of 1963, women and minorities still face pay discrimination. It’s a vicious circle. Salary history bans—which began surfacing in 2016—are aimed at ending the cycle of pay discrimination by taking salary history out of the equation when companies hire new employees.   

To date, the following states (and one commonwealth) have passed salary history bans that apply to private employers:

  • Alabama 
  • California 
  • Colorado 
  • Connecticut 
  • Delaware 
  • Hawaii 
  • Illinois
  • Maine 
  • Massachusetts 
  • New Jersey
  • New York
  • Oregon
  • Puerto Rico
  • Vermont
  • Washington

In addition, Michigan, North Carolina, Pennsylvania, and Virginia have passed legislation geared solely to state agencies. More than a dozen counties and cities have enacted similar laws on a local level. (And in a reverse twist, Michigan and Wisconsin have passed laws prohibiting local governments from enacting local salary history bans.)

While all these laws ban employers from asking pay history questions, they vary on other specifics. For example:

  • Some laws prohibit employers from using pay history to set compensation even when applicants volunteer it; others allow it.
  • Some laws allow employers to discuss pay history once they’ve extended a job offer; others allow applicants to share salary history to negotiate higher wages.
  • Some laws prohibit employers from taking disciplinary action against employees who discuss pay with coworkers.

Penalties for non-compliance vary as well—and some of these new laws remain unclear on the subject. Some jurisdictions have issued specified fines; others allow wronged applicants/employees to take civil action. Regardless of what the penalties are, most employers would rather maintain compliance than take the risk. 

How to Comply with Salary History Bans 

Obviously, the first step to achieving compliance is to make sure you’re up to speed on each of the pay history laws that impact you. Some multi-state employers are electing to comply on a jurisdiction-by-jurisdiction basis, creating multiple sets of hiring policies. Others have developed a universal policy that incorporates the most rigorous elements of all relevant laws.

Whatever approach you take, make sure your workflows and HR software support your compliance efforts. In addition, HR specialists recommend following these seven steps:     

  • Update your job application form, omitting salary history questions.
  • Update your job interview scripts to omit these questions as well. One generally safe approach: ask candidates about their salary expectations instead. 
  • Formally amend your hiring procedures wherever they are documented: in HR manuals, employee handbooks, etc.  
  • If you’ve used job applicants’ current salary as a basis for job offers in the past, rethink your compensation-setting and negotiation strategies.
  • Train everyone involved in hiring—frontline managers, talent acquisition specialists, HR staff. Some interviewers struggle to give up this question.
  • Post relevant labor law posters regarding salary ban regulations where interviews are conducted. It not only indicates your intent to maintain compliance, but helps keep the issue top-of-mind. 
  • Determine and document how wages are determined for new employees, if you haven’t already. Consider adopting a pay transparency policy that would make pay scales and job grades readily accessible.

What Does the Future Hold?

Pay equity issues are in the spotlight right now, and often, state-led labor law initiatives lead to the passage of similar laws on the federal level. In March of this year, the U.S. House of Representatives passed the Paycheck Fairness Act.  Should this bill be signed into law, it would create a nationwide salary history ban, while also requiring employers to prove that pay disparities are job-related and not discriminatory. 

Labor compliance has always been complex, but lately it seems even more so. For up-to-the-minute information about salary history bans and other pressing wage and hour issues, attend our upcoming webinar, Key Legislative Updates for the Hourly Workforce in 2019 and Beyond, September 24 from 1-2 pm ET. Register now at HR.com, and get a heads-up on what lies ahead.

Filed Under: Compliance, HR News, Payroll & Tax