The effort to combat gender pay inequity has taken many twists and turns at the federal level. We've all seen reports and data about the difference in average pay between men and women (83%), and the even greater disparity involving minority women (i.e., 53%) when compared to non-minority males.
OFCCP and EEOC have been at the forefront of many attempted policy and program measures. Included among these are the OFCCP's pay transparency poster and Executive Order about wage confidentiality, both of which were enacted during the Obama administration. Other attempts involved the ill-fated Fair Pay and Safe Workplaces Executive Order, and EEO-1 Equal Pay Report requiring intensive compensation data reporting – neither of which survived.
States and Municipalities Jump into the Fray
States and municipalities have joined the pay disparity battle, although from a very different perspective. Several states and local government entities have taken up the torch to combat perceived pay inequity between men and women through the job application, screening, and interview process.
This next wave of regulation to narrow the gender pay gap is prohibiting employers from asking an applicant's wage/salary history prior to extending a job offer. The philosophy behind these measures is the view that many employers extend job offers and compensation based on a candidate's current or recent rate of pay. Paying historically higher compensated (on average) males based on their current wage/salary perpetuates and compounds pay disparity going forward, even if future pay adjustments are comparable for men and women employees.
Who's Doing It?
There are many variations on this theme, but it involves a ban on salary inquiries by employers at various stages of the employment process. Several states and local entities are prohibiting employers from asking questions about an applicant's salary history or using past pay history to justify a gender pay difference:
- Delaware – December 2017
- California – January 2018
- Massachusetts – July 2018
- Oregon – October 2017, with legal actions as of January 1, 2019
- Hawaii – effective January 1, 2019
In addition, several major cities have undertaken similar steps:
- New York, New York – October 2017
- Puerto Rico – March 2018
- San Francisco – July 2018
- Philadelphia – on hold pending outcome of legal challenge
Other states have undertaken preliminary steps by prohibiting their government agencies from inquiring about prior salary, while not regulating the private sector. In contrast, some states (such as Michigan and Wisconsin) have enacted legislation prohibiting local governments from implementing laws/ordinances that interfere with private employers' ability to inquire about pay history, thus moving in the opposite direction.
While the theory behind each of these state/local salary history bans seems to be consistent, the devil is in the details. Some of these laws ban inquiring about prior compensation at all, while some prohibit questions about prior salary before an initial job interview or a job offer. Other versions prohibit screening candidates in any manner based on salary history, and some prohibit using a third-party agent to do an ‘end-around' to inquire about salary, while other laws simply prohibit the use of a candidate's prior pay when establishing a job's compensation value. Still other laws permit discussion of compensation history in an interview if an applicant voluntarily discloses it.
Courts may now be willing to accept the theory behind these types of initiatives. Earlier this year the Ninth Circuit Court of Appeals held that "prior salary is not job related and it perpetuates the very gender-based assumptions about the value of work that the Equal Pay Act was designed to end." Rizo v. Yovino (9th Cir. en banc; April 9, 2018). The Ninth Circuit essentially determined that prior salary history is not a reasonable factor other than sex under the Equal Pay Act for pay differences when there is substantially similar work.
Practical Suggestions for HR Departments
What can an employer do when it has employees spread across multiple states or metropolitan areas with such prohibitions, and screening is done locally by hiring managers?
- First, a company must know the law where it has employees, whether that be different states or localities that have passed salary ban laws or ordinances. Legal advice should be sought because there are very subtle, yet distinct differences in the prohibitions underlying each of these state laws or local ordinances.
- Employment applications may need revising to remove prior pay questions for use where a state or local law prohibits prior pay inquiries.
- Some employers have responded to the patchwork of state and local restrictions by removing pay inquiries from all job applications company-wide. This creates a uniform, nationwide application form for use by hiring managers regardless of whether there is an applicable state or local constraint on salary history inquiries.
- Hiring managers who engage in telephone screens, job interviews, and selection decisions, should be trained on what the applicable law prohibits vs. allows in any state or municipality that has some sort of ban on inquiring about prior pay history.
- Some laws may permit an employer to ask about a candidate's wage/salary "expectations," instead of a direct inquiry about the candidate's actual prior pay history. However, each such law or ordinance must be carefully checked for specific restrictions, since even that sort of a question may explicitly or constructively violate some of these laws.
- It may be possible for a third-party vendor to obtain prior salary history as part of a background check. However, be sure to check the law or ordinance of the state or locality in question. As stated above, some of these laws ban obtaining an applicant's current/prior pay, some ban searching public records for pay history, and some ban any form of screening or selection based on pay level information. An employer will likely risk liability exposure for a violation engaged in by a recruiting agent acting on its behalf.
Tread these waters of applicant salary history carefully. Employers may find little insulation for violations by third-party agents or recruiters who pursue salary history as a screening tool when acting on behalf of their client employer. The safest approach to navigating the maze is to establish compensation levels or ranges according to market survey data or the value of the job, and follow a "don't ask, don't tell" approach. Notwithstanding, that's much easier said than done in this full employment economy when luring key talent away from competitors is so difficult.
Gary Chamberlin is the Chair of Miller Johnson's Affirmative Action & Government Contractors practice group. For questions about this article, or OFCCP/affirmative action and government contractor compliance matters, contact Gary directly at firstname.lastname@example.org or (616) 831-1709. Other resources are available on Miller Johnson's website.
The information in this article has been prepared for informational purposes only. This is not legal advice, nor intended to create or constitute a lawyer-client relationship. Before acting on the basis of any information or material, readers who have specific questions or problems should consult their lawyer.