A growing number of state and local governments across the country are enacting laws that limit employers’ ability to ask about or consider applicants’ salary history. These laws are part of a nationwide effort to reduce pay inequity for women and minorities. The logic is straightforward. Past pay discrimination is perpetuated (either consciously or subconsciously) when employers make decisions based on applicants’ prior salaries.
Eliminating pay inequity is a must. But the patchwork of roughly three dozen laws nationwide still poses a compliance challenge for employers. For example, while Alabama prohibits retaliating against an applicant who refuses to provide wage history, it does not prohibit an employer from seeking that information. On the other end of the spectrum, states like Illinois completely prohibit employers from seeking or relying on salary history.
Though there are outlier states and pending legal challenges, all signs point to a continued spread of salary history bans. This article aims to demystify this rapidly evolving legal landscape, particularly for California employers.
California’s Salary History Ban
As with most employee-protective legislation, California was an early adopter of the salary history ban. The legislature enacted Labor Code section 432.3, the salary history ban statute, in October 2017, and amended it in July 2018.
Section 432.3 prohibits an employer from (1) relying on salary history information of an applicant in determining whether to offer employment or what salary to offer and (2) seeking, personally or through an agent, salary history information about an applicant. If, however, the applicant voluntarily, and without prompting, discloses salary history information, section 432.3 permits the employer to consider and rely on that voluntarily disclosed information in setting the applicant’s salary.
The statute does not prohibit employers from asking applicants about their “salary expectation for the position being applied for.”
Section 432.3 also requires an employer, upon the applicant’s request made after he or she has completed an initial interview, to provide the pay scale (salary or hourly wage range) for the position to which the applicant is applying.
While section 432.3 does not specify a penalty for its violation, a representative claim under the California Labor Code Private Attorneys General Act (“PAGA”) is available.
Salary History Bans Nationwide
In the two years since California enacted section 432.3, salary history laws have proliferated. As of today, the following states, counties, and cities have enacted rules governing use of salary history: Alabama, California, San Francisco (CA), Colorado, Connecticut, Delaware, District of Columbia, Atlanta (GA), Hawaii, Illinois, Chicago (IL), Louisville (KY), New Orleans (LA), Maine, Montgomery County (MD), Massachusetts, Michigan, Jackson (MS), Kansas City (MO), New Jersey, New York, New York City (NY), Albany County (NY), Suffolk County (NY), Westchester County (NY), North Carolina, Cincinnati (OH), Toledo (OH), Oregon, Pennsylvania, Philadelphia (PA), Pittsburgh (PA), Puerto Rico, Columbia (SC), Richland County (SC), Salt Lake City (UT), Vermont, Washington, and Wisconsin.
A salary history ban passed in the New Hampshire legislature last year but was vetoed by the governor in July. Bans have also been proposed in, among other places, Arizona, Florida, Idaho, Montana, South Carolina, and West Virginia.
While most state and local salary history bans share the same basic features, the devil is in the details. No two laws are the same, and employers operating in multiple jurisdictions should be incredibly careful and cognizant of these — often subtle — variations.
Asking About Salary History. By and large, most laws forbid employers (or third parties directed by employers) from seeking, requesting, or asking applicants about their wage and salary history. Many bans extend beyond asking applicants themselves and also prohibit employers from reaching out to current or past employers. New York City (NY) and Suffolk County (NY) go so far as to prohibit employers from searching publicly available records, even on websites like Glassdoor.
Relying on Salary History. As in California, many salary history laws also prohibit employers from considering, using, or relying upon an applicant’s salary history as a factor in determining whether to offer employment or what salary to offer. The scope of these restrictions varies immensely, making this an easy area for employers to trip up. For example, Westchester County (NY) prohibits employers from relying on salary history, unless the salary history was voluntarily disclosed by the applicant to support a higher wage than what the employer has offered. In California, Hawaii, and New Jersey, an employer can consider voluntarily disclosed salary history information in determining a salary for the applicant, but not in making a hiring decision. Illinois, on the other hand, forbids employers from considering even voluntarily disclosed salary history information. In still other locales, an employer is limited to confirming voluntarily revealed salary history information (in some cases only after an offer of employment with compensation has been made).
Screening. Unlike California, several jurisdictions, including Delaware, Illinois, Kansas City (MO), New Jersey, Albany County (NY), and Oregon, specifically forbid employers from “screening” applicants based on their compensation histories, including by requiring that an applicant’s prior compensation satisfy certain minimum or maximum criteria.
Retaliation. Most laws forbid retaliation against applicants who refuse to voluntarily disclose salary history information.
Salary Expectations. Several jurisdictions, including Delaware, Hawaii, Illinois, Kansas City (MO), New York City, and Vermont, share California’s express exception for discussions about salary or compensation “expectations.”
Bans on Bans
The wave of laws banning salary history questions is not without its countercurrents. Both Michigan and Wisconsin passed laws in 2018 prohibiting local governments from enacting any laws or regulations that restrict an employer’s ability to ask about salary history. Supporters of the Michigan and Wisconsin laws argue that they provide uniformity throughout the states and protect employers from having to navigate conflicting municipal ordinances. Opponents deride the laws as a step backward in the push for pay equity.
Are Salary Bans Unconstitutional?
Salary history bans have not gone unchallenged in the courts. Philadelphia, one of the first jurisdictions to enact such an ordinance, prohibited employers from inquiring about an applicant’s wage history and from relying on wage history to determine an applicant’s salary. The Chamber of Commerce for Greater Philadelphia filed suit in federal court to enjoin the ordinance on the ground that it violates the First Amendment’s free speech clause. In April 2018, a federal judge in Philadelphia agreed that the ordinance’s inquiry provision (but not its reliance provision) violates the First Amendment and granted a preliminary injunction halting enforcement of it. See Chamber of Commerce for Greater Phila. v. City of Phila., 319 F. Supp. 3d 773 (E.D. Pa. 2018).
The court found that while there is no dispute “that there is a gender pay disparity,” there was insufficient evidence to establish the alleged harm of discriminatory wages being perpetuated in subsequent wages such that they contribute to a discriminatory wage gap. Without that evidence, the city could not show that the ordinance’s inquiry provision would directly advance its interest in narrowing the wage gap and, thus, could not withstand First Amendment scrutiny.
Both sides appealed to the United States Court of Appeals for the Third Circuit. On February 6, 2020, the court affirmed the district court’s denial of a preliminary injunction as to the reliance provision but reversed its grant of a preliminary injunction as to the inquiry provision. See Greater Phila. Chamber of Commerce v. City of Phila., Nos. 18-2175, 18-2176, – F.3d – (3d Cir. 2020). The Third Circuit’s decision clears the way for Philadelphia to begin enforcing its ordinance, for now. Given the constitutional dimensions of the case, a petition to the United States Supreme Court seems likely. Whether or not the Supreme Court grants review, this case will have a significant impact on the viability of salary history bans nationwide.
The Federal Equal Pay Act
The federal government has not enacted a salary history ban. The federal Equal Pay Act of 1963, though, prohibits employers from paying wages to employees at a rate less than the rate at which it pays employees of the opposite sex for equal work on jobs that require equal skill, effort, and responsibility, and which are performed under similar working conditions. 29 U.S.C. § 206(d)(1).
In April 2018, the same month the Philadelphia ordinance was enjoined, the United States Court of Appeals for the Ninth Circuit held that the Equal Pay Act forbids employers from relying on prior salary, either alone or in combination with other factors, to justify a wage differential between male and female employees. See Rizo v. Yovino, 887 F.3d 453 (9th Cir. 2018) (en banc). As the majority wrote, “[t]o hold otherwise—to allow employers to capitalize on the persistence of the wage gap and perpetuate that gap ad infinitum—would be contrary to the text and history of the Equal Pay Act, and would vitiate the very purpose for which the Act stands.”
In a bizarre procedural twist, the Ninth Circuit released its decision, authored by the late Judge Stephen Reinhardt, 11 days after Judge Reinhardt’s death. The Supreme Court vacated the decision and remanded for further proceedings, explaining that Judge Reinhardt’s vote (which made a difference in the outcome of the case) could not be counted after his death. See Yovino v. Rizo, 139 S. Ct. 706 (2019). The case is now back before the Ninth Circuit to be decided again with a new judge in his place.
Other courts have disagreed with Rizo. In March 2019, a federal court in Illinois, relying on two decisions from the Seventh Circuit, declined to follow Rizo and held that prior wages are a valid “factor other than sex” under the Equal Pay Act that can alone justify a pay disparity. See Hubers v. Gannett Co., Inc., No. 16 C 10041, 2019 WL 1112259, at *4–5 (N.D. Ill. Mar. 11, 2019) (citing Lauderdale v. Ill. Dep’t of Human Servs., 876 F.3d 904 (7th Cir. 2017); Wernsing v. Dep’t of Human Servs., 427 F.3d 466 (7th Cir. 2005)).
Disagreeing with both the Ninth and Seventh Circuits, other courts have concluded that while employers may consider prior salary as part of a mix of factors, they cannot consider prior salary alone. See Riser v. QEP Energy, 776 F.3d 1191 (10th Cir. 2015); Drum v. Leeson Elec. Corp., 565 F.3d 1071 (8th Cir. 2009); Irby v. Bittick, 44 F.3d 949 (11th Cir. 1995); Aldrich v. Randolph Cent. Sch. Dist., 963 F.2d 520 (2d Cir. 1992).
Given the confusion among the federal courts, this may be an issue destined for the Supreme Court. In the meantime, Rizo suggests that employers in states, like California, that (for now) permit employers to consider voluntarily disclosed salary history information, should proceed with caution lest they run afoul of federal law.
In just a few years, what started off as a few isolated laws aimed at creatively combating pay inequity has now become a nationwide trend. Employers across the country, even in states not yet affected by a salary history ban, must take notice.
Employers should revisit their employment application materials and ensure they are not directly or indirectly soliciting information they should not be. For example, in New York City, boilerplate disclaimers on multi-state applications that certain applicants should not answer a salary history question are insufficient to avoid liability. The State of New York also recently issued guidance prohibiting employers from posing “optional” salary history questions on a job application.
Employers must also ensure that anyone involved in screening, interviewing, or otherwise assessing applicants (including third party recruiters or investigators) is aware of and complying with the law. Knowing in the midst of an interview the limits of “voluntary disclosure” and what exactly qualifies as a discussion about “salary expectations” is essential to staying on the right side of the law. Even if the employment application is spotless, an uninformed manager or headhunter can land an employer in hot water by casually asking a question that, for many, is still considered routine.
Compliance does not stop at the interview. More and more states are prohibiting even thinking about salary history in deciding whether to make an offer or what salary to pay. Decision makers long-accustomed to factoring salary history into their hiring process may need training on this. As the saying goes, old habits die hard.
Going forward, employers operating across jurisdictions (even within the same state) need to be particularly cautious. For example, a Nevada employer who hires an employee in California will find itself hailed into a California court for violating section 432.3 if it asks about salary history, even though Nevada has no such law. The fundamental business decision for these employers is whether it makes more sense to adopt a uniform policy eliminating salary history questions entirely or to stay abreast of developments and maintain separate policies for different locations.
Keeping on top of this growing trend can save a substantial amount of heartache down the road. Contact Payne & Fears LLP if you have any questions.
Tyler B. Runge can be reached at tbrpaynefears.com or (949) 797-1243.