Friday, April 21, 2017

The Recent Push to Prohibit Employers from Asking Applicants About Their Salary History

In the ongoing effort to combat the wage gap between men and women, there has been a recent push to prohibit employers from requiring, or even asking, job applicants to disclose their salary history. The thinking here seems to be that, although the consideration of prior salary may appear to be facially neutral, it can perpetuate sex-based wage disparities.

Last summer, Massachusetts became the first state to adopt legislation prohibiting salary history inquiries. Philadelphia has passed a similar law, but has decided to put it on hold for the time being in light of a lawsuit filed by the Chamber of Commerce for Greater Philadelphia contending that the ordinance is an unconstitutional restriction on speech. Last year, similar proposed legislation was introduced in the D.C. Council by member David Grosso and in the U.S. Congress by Eleanor Holmes Norton and three cosponsors.

These laws and bills vary to some extent, but they generally focus on inquiries about salary history before an offer of employment or a salary offer is extended to a prospective employee. Because they do not prohibit prospective employees from voluntarily disclosing their salary histories, they may not necessarily foreclose employers from relying on prior salary information to some extent in setting a new employee's starting pay. For example, some applicants will likely voluntarily disclose their current salaries to try to negotiate higher starting pay with prospective employers. If an applicant currently earns $100,000 annually working for a competitor, an employer will likely have to offer at least that much to entice the individual to jump ship.

Although federal EEO law does not prohibit questions about salary history, that does not mean that employers are free to rely willy nilly on prior salary in setting a new employee's starting pay. Under the Equal Pay Act, an employer can only justify a wage discrepancy between employees of the opposite sex performing the same job by showing that the discrepancy is based on a factor other than sex. To the extent a prospective employee's prior salary is grounded in sex discrimination, reliance on that prior salary would not constitute a factor other than sex. Thus, in its Compliance Manual, the EEOC explains that it is impermissible under the Equal Pay Act to rely solely on prior salary to justify a pay discrepancy between a man and a woman in the same job:
However, if the employer can prove that sex was not a factor in its consideration of prior salary, and that other factors were also considered, then the justification can succeed. The employer could, for example, show that it: (1) determined that the prior salary accurately reflected the employee's ability based on his or her job-related qualifications; and (2) considered the prior salary, but did not rely solely on it in setting the employee's current salary.
Federal agencies are authorized by federal law and regulation to consider an applicant's existing salary in some circumstances when setting a new employee's starting salary. In North v. United States, the court upheld a salary discrepancy between the plaintiff, a female attorney hired at the GS-14 level by the Department of Education, and a man who was also hired as a GS-14 attorney. The court concluded that the pay disparity did not violate the Equal Pay Act because it was based on the male attorney's "superior" qualifications and prior salary. Although the plaintiff also had superior qualifications -- meaning that she and the male attorney were both considered "highly qualified" for the position -- her starting salary exceeded her prior salary, so her pay was set at the lowest step of the GS-14 pay grade. The male comparator's salary, by contrast was set at the highest step of the GS-14 pay grade (almost $30,000 above the minimum), and even at that rate, he made less than in his previous job.

Although there seems to widespread concern about the potentially discriminatory effects of relying on prior salary, there also seems to be a recognition that salary history information has legitimate uses. At a minimum, new laws prohibiting salary inquiries may discourage employers from relying on an applicant's salary history as a default starting point for a salary negotiation. In this regard, employers may be required to determine the approximate salary range for a prospective employee based on the position being filled and the market value of the applicant's job-related skills and qualifications. Within that range, however, an applicant might still be able to use his or or her prior salary as a bargaining chip to try to negotiate for higher starting pay.

This blog reflects the views solely of its author. It is not intended, and should not be regarded, as legal advice on how to analyze any particular set of facts.