Anyone who has conducted a job interview, or who has been interviewed knows how stressful the process can be. The interviewer is often stressed because they must walk a fine line between conducting a comprehensive interview and adequately vetting any potential applicant while also taking care to honor a plethora of employment and labor laws. The hiring process is stressful for the applicant because not only do they want the position for which they applied and interviewed, the job applicant also, quite naturally, wants the job at the highest pay rate they can fairly and reasonably negotiate.
Employers typically request that job applicants provide prior salary history because it helps streamline the interview process by managing mutual expectations early in the hiring process. Setting salary expectations upfront allows both parties to determine if they want to move forward in the interviewing process. Many employers also request prior salary information because they believe it is the most efficient way to learn about the actual market rate for the position and allows them to set pay accordingly.
When the question of past salary history is asked during an interview, it can make an already stressful situation much worse. The interviewee may worry that disclosing a prior salary which is too low will limit future earning potential. Conversely, the same interviewee may fear that citing a previous salary that is too high may price herself out of the job she wants. The downside to disclosing prior salary history may also give the employer the opinion that the applicant’s previous pay is an accurate representation of their knowledge and skill. That is, the employer may believe that a job applicant with a higher salary is better at their job, and a job applicant with a lower salary is not as qualified. The ability to negotiate a better salary, or lack thereof, is but one of many factors that contributes to the wage gap between men and women.
The Equal Pay Act was signed into law more than 50 years ago to put women and men on equal footing and to ensure they are provided equal pay for performing the same work. But, years of legal research has shown that the Equal Pay Act has not quite achieved its desired goal. Studies show women make about 80 cents for every dollar men earn on average. Studies also show minorities make less money than whites on average, with minority women taking home the least pay of all.
In the last couple of years, there have been various initiatives designed to address the lack of equal pay in the workforce. For instance, the U.S. Equal Employment Opportunity developed a now-stalled initiative that would have required employers with 100 or more employees to report W-2 wage information and total hours worked for all employees by race, ethnicity, and sex on a revised EEO-1 form. Many employers, even those concerned and proactive about achieving pay equity for employees, were unhappy about the EEO-1 form revisions because it put a tremendous administrative burden on them and their support staff and many believed that the reporting requirements would not have any positive effect on identifying illegal pay discrimination.
Most recently, several jurisdictions have implemented salary ban legislation that prohibits employers from inquiring about a job applicant’s prior salary history. The concept behind salary bans is to stop wage gaps as workers change jobs. The salary ban is designed so that underpaid employees do not continue to remain underpaid in new positions because new employers continue to use prior salaries as a mechanism for setting pay in a future job. Although salary ban legislation has been designed to promote pay equity, some critics believe that it could have the unintended, opposite effect.
Some critics have cited legal research on this issue, finding women who do not discuss previous salaries are offered as much as 1.8% less during salary negotiations than women who chose to disclose past salaries voluntarily or who forthrightly answered the question when asked.
But, it appears from most accounts that the proponents of salary ban legislation far outnumber the critics. To date, about eight jurisdictions have adopted or plan to adopt laws that restrict employers from asking about salary history. California and San Francisco’s salary ban laws went into effect on January 1, 2017, and July 1, 2017, respectively. Philadelphia’s salary ban law was set to be implemented in May 2017 but has since been stayed, and Oregon’s salary ban law went into effect on September 6, 2017. New York City and Delaware’s salary ban restrictions will go into place by the end of 2017, and Puerto Rico and Massachusetts will implement their salary ban legislation in March 2018 and July 2018, respectively.
Although there is no federal employment law in place that implements salary ban restrictions, it is not unlikely that federal legislation will be implemented at some point in the future. In the interim, employers in each state where salary ban restrictions are already adopted will need to work with their human resources department to modify the hiring process, so they remain compliant with all employment laws. Employers may want to think about eliminating salary-related questions during the interview process altogether and instead carefully examine the skills, knowledge, and talent of each applicant, and offer a salary based on that job applicants perspective value to the company, not on salary history, alone or in part. The alternative to eliminating salary questions entirely from the interview process is to reframe the discussion concerning salary. For instance, in lieu of asking salary history questions, the employer may simply ask the applicant how much they would like to be paid.
Failure to follow the law related to salary ban restrictions could result in steep penalties for businesses. San Francisco’s law imposes penalties between $100 and $500 depending on whether the company has previous offenses. Delaware docks employer anywhere from $1,000 to $10,000. And, New York City employers levy fines as hefty as $125,000 for an unintentional violation, and $250,000 for an intentional one.
Although there may be some resistance to these new restrictions at the moment, in the long run, these laws will likely have a significant impact on achieving pay equity and closing the wage gap for women and minorities.
Law 360, “4 Things For Employers To Know As Pay Inquiry Bans Crop Up” by Braden Campbell (October 13, 2017)