03 Apr Hiring Mistake With Legal Ramifications: Salary History Bans
The male-female pay gap is persistent. Women earn only 83 cents for every dollar a man makes. The National Committee on Pay Equity launched Equal Pay Day to illustrate this gap. In 2023, this day falls on Tuesday, March 14, 2023. This represents how long women would need to work into the following year to make the same as men did in 2022.
To narrow the gap, states are introducing salary history bans to prevent employers from asking candidates about previous pay. This also keeps employers from basing new salaries around outdated figures and perpetuating lingering pay inequalities. So what does this mean for your business?
This article will explain salary history bans and outline which states have enacted them. To help you avoid penalties, we reveal what questions are illegal to ask and give tips to stay compliant.
What is a Salary History Ban?
A salary history ban prohibits employers from asking applicants about previous or current salaries. The main motivator for the ban is to help eliminate structural bias. Ideally, this would narrow gender, race, and ability-related pay gaps to promote pay equity. Some laws go further.
Several states prohibit employers from relying on applicants’ pay histories to set a new salary once they discover or after applicants volunteer that information. Other laws ban employers from disciplinary action against staff discussing wages with coworkers. Currently, there is no federal salary history ban.
However, states like Alabama, California, and Delaware, as well as municipalities including Chicago, Louisville, and Kansas City, have enacted salary bans. While the U.S. is making headway in narrowing the gender pay gap, it still ranks number 27 on the global gender gap index. Also, the pay gap reaches across all ethnic backgrounds. For instance, black women only earn 58 cents on the dollar white men earn.
By prohibiting employers from asking candidates about pay history, lawmakers aim to end the common employer practice of basing workers’ starting pay and pay increases on the previous salary. These efforts aim to stop candidates from carrying pay gaps from job to job.
Also, if employees are not allowed to discuss wages with fellow workers, it’s harder for women to detect or address pay discrimination. While banning the salary history question won’t stop companies from offering lower wages to women and minorities, it is a good starting point to address various pay gaps.
Efforts to close the pay gap are increasing as many states and municipalities introduce pay transparency laws and enact salary history bans.
States with Salary History Bans
States with salary history bans are growing. So far, 28 states have enacted some form of a salary history ban. This includes:
- New Jersey
- New York
- North Carolina
- Rhode Island
- South Carolina
Let’s examine a few state laws in more detail:
Alabama – Enacted in 2019, Alabama state law does not ban employers from asking about past salaries. Still, it doesn’t allow employers to refuse to take on, interview, promote or employ applicants based on the refusal to answer questions about previous pay.
Maryland – Enacted in 2020, employers may not use pay history to make hiring decisions or even when setting compensation. The law prohibits employers from relying on salary history when screening a candidate for a job, even if the candidate volunteers this information. However, they may confirm wage history to support a higher salary than the original offer. Employers are also prohibited from retaliating against applicants not voluntarily providing this information.
Oregon – Enacted in 2017, employers may not enquire about an applicant’s current and past wages before making a job offer. Additionally, they may not screen applicants based on their current or past pay. Neither can they base salaries on potential employees’ current or past pay, apart from internal staff moving to a new role. All three laws are valid for all employers.
Virginia – Enacted in 2019, Virginia legislation eliminates salary history, school name, age indicator, and other fields with potential for unconscious bias from application forms for state agencies. Furthermore, application forms will offer a preferred pronoun option.
Is it Illegal to Ask for Salary History?
In states with a salary history ban affecting all employers, asking job candidates for salary history during the hiring process is illegal. These states include:
- New Jersey
- New York
- North Carolina
- Rhode Island
Can Employers Ask About Current Salary?
No, employers or employment agencies cannot ask about current pay during hiring if they are based in cities or states where this practiceis illegal. While this practice protects external candidates, salary history bans don’t safeguard staff applying for a promotion or transfer, as the company already knows their salaries.
Tips to Ensure Compliance with Salary History Bans
While there may not be a salary history ban in your city or state, it’s good practice to ensure compliance, as many legislators are moving fast to introduce bans. So how can you stay compliant if you rely on salary history data to create job offers?
Follow our tips below to remain compliant and avoid potential fines.
- Train HR staff and hiring managers on how to avoid salary history questions.
- Ensure hiring managers don’t base the offer on salary information if an applicant volunteers during an interview.
- If you find out that staff salaries have been discriminatory in the past, aim to rectify this situation.
- Do market research to develop fair wages for each job. Look at what other businesses pay for similar positions, the average local salaries, the candidate’s skills and education level, and benchmark salaries of current employees.
- Consider asking candidates about salary expectancy instead of pay history: this will focus the conversation on the candidates’ skillset and qualifications.
- Contemplate being proactive and following the lead of companies like L’Oreal USA by conducting a third-party pay audit to ensure your workers are paid equally, regardless of gender, race, sexuality, and ability.
- If you’re a multistate employer, staying compliant with a patchwork of laws is tricky; seeking professional advice can help avoid penalties.
What To Do Next
Many states have introduced salary history bans to address pay inequities. What does this mean for you?
If your state has enacted a ban for all employers, adhere to the law and ensure your hiring managers don’t ask the salary question or base a job offer on pay history. This applies even if a candidate volunteers that information. Compliance with the law is the only way to avoid fines; our tips will help you stay compliant.
This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.