Stop Asking Applicants for Salary History

Do you ask candidates for salary history?

If so, stop! Currently, California, Massachusetts, New Orleans, New York (limited to state agencies), New York City, Philadelphia, and Puerto Rico have laws on their books prohibiting the practice of asking applicants for their salary histories, while many other states have recently taken up discussion of legislation on the topic.

Even though it is legal in California, there are some serious issues to think about when creating your hiring processes. In 2015, female full-time workers made only 80 cents for every dollar earned by men, a gender wage gap of 20 percent, according to the Institute for Women's Policy Research. Women, on average, earn less than men in nearly every single occupation for which there is sufficient earnings data for both men and women to calculate an earnings ratio.

Consider the following

An employer hires two individuals – a male and female – to fill two identical jobs (i.e., same job qualifications and same job duties). Both individuals satisfy the educational, skill, and other technical requirements for the job and they have similar employment histories.  However, at their prior places of employment, one individual earned $50,000 at his/her prior place of employment, while the other earned $60,000.

The employer agrees to hire both individuals at 10% more than their prior salaries. Thus, the starting pay for one hire is $55,000 while the starting pay for the other is $66,000, leading to a pay differential of $11,000 (20%) during the first year of employment.

This sounds innocent enough, but remember the OFCCP and the EEOC take the position that, in light of historical societal differences in pay based on gender and race, Executive Order 11246, Title VII, and the Equal Pay Act and California’s Fair Pay Act prohibit employers from justifying differences in pay based solely on salary history.

Here are some tips for ensuring your procedures comply with the requirement and to aid in defense if you are accused of discrimination:

• Do not ask salary history from applicants;

• Document all factors that contribute to an initial pay determination including, but not limited to, educational history, degree, prior employment experience, special skills and expertise, individual candidate negotiations, market factors, and other position-specific factors;

• Document how each factor contributed to pay and the specific reasons for the rate of pay chosen;

Periodically evaluate whether initial differences in pay should be reduced over time when employees have substantially similar job duties and responsibilities.

Lauren Sims, the author of this article, is the Director of Human Resources Consulting at eqHR Solutions.

eqHR Solutions provides professional, tactical and strategic, human resources support,  ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.

When your business requires professional Human Resources or Payroll advice to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no obligation consultation.