News & Resources

What's Trending? Pay Inquiry Bans

Nov 27, 2017
Twitter Facebook  Google+ 

State and local pay inquiry bans are popping up left and right across the country. These laws generally prohibit employers from inquiring about an applicant’s pay history and sometimes from using such information to screen applicants and/or set salary offers, regardless of whether an employer obtains such information from the applicant, or via a public records search or criminal background check. Ohio has yet to pass a pay inquiry ban law. These laws, however, should be on the radar of multi-state employers as they can be difficult to comply with and can result in an increased burden.

Most recently, California passed a new law barring employers from asking applicants about their salary histories. Just weeks prior, Oregon passed a similar law. Several other jurisdictions, including the cities of San Francisco, New York City, and Philadelphia, the states of Delaware and Massachusetts, and the commonwealth of Puerto Rico have also adopted or plan to adopt similar legislation. Employers operating outside these eight jurisdictions should not ignore these pay inquiry bans as similar federal legislation is also pending in Congress. If passed, the Pay Equity for All Act would amend the Fair Labor Standards Act to prohibit employers from seeking or requiring previous wage or salary information from job applicants.

The stated purpose of pay inquiry bans is to combat the pay gap that continues to affect women and minorities. Specifically, they are designed to avoid disadvantaging employees simply because they have been underpaid in past positions. For example, an employer that has a practice of paying new hires 3% more than their current pay perpetuates the wage gap as such practice, though unintentional, allows the applicant’s lower wages and salaries to follow them, perhaps throughout their entire career. Unable to obtain an applicant’s pay history, the theory is that employers will be forced to rely upon objective data to determine the going salary rate for a particular position which in turn should shrink the pay gap. This can result in employers being forced to perform more costly market surveys to determine the going rate for positions.

Though state and local laws have the same ultimate goal there are many differences between them, which can make it difficult for multi-state employers to develop a uniform policy covering several jurisdictions. For instance, Oregon’s law places an absolute ban on employers asking about an applicant’s pay history or using such information in setting a salary offer. New York City’s and California’s laws, however, allow employers to use an applicant’s salary history if the applicant voluntarily offers it without being prompted. Further, some employers are barred from considering past salaries for all applicants, while others are allowed to consider such information for internal applicants.

Violations of these laws can result in substantial penalties. For example, a New York City employer can be fined up to $150,000 for an unintentional violation and up to $250,000 for an intentional violation. Other jurisdictions are much more lenient and impose penalties for a first offense of no more than $5,000, and $10,000 for subsequent violations.

For those employers operating in jurisdictions that have already passed pay inquiry bans, it is critical to review employment applications and interview guidelines to ensure compliance. Employers should also consider training managers and supervisors on how to comply with these new laws.

Should you have any questions regarding pay inquiry bans, please feel free to contact Olivia Hochschwender, Katie Basch, or any other KWW attorney.