With Illinois’ recent adoption of the Salary History Inquiry Ban taking effect on September 29, 2019, there are currently 17 state-wide salary history bans, 17 local bans, as well as two states that have enacted laws to prohibit bans. This trend will likely continue with more local and state governments enacting equal pay legislation.
Understanding the Salary History Ban
The reasoning behind these salary history inquiry bans is to help end racial and gender discrimination in the workplace and close the pay gap by preventing employers from basing a potential employee’s new salary off of their old one. The belief is if an employee is paid under market at her current job, asking that candidate about her current salary increases the likelihood that she will continue to be underpaid in her new position should the potential employer base an offer off of her current salary. An employee that starts out behind on the pay scale may never catch up within her current organization or at a new one if that salary history follows her. While the employer may see paying below market or what they budgeted for the role as “getting a deal” on talent, that employer might actually be contributing to and continuing a trend of pay disparity.
As you can imagine, these laws vary throughout each state and locality. For example:
- New York and New Jersey have state-wide bans set to take effect in January 2020. Currently both states have laws that prohibit state departments and agencies from asking about salary history. That said, New York City and three counties in New York enacted bans in 2017 and 2018 that include employers outside of government.
- Additional local bans include cities and counties such as Kansas City, Missouri and Montgomery County, Maryland. Again, these vary greatly. Kansas City’s ordinance states that the prohibitions do not apply to “voluntary and unprompted disclosures of salary history information by an applicant.” The Montgomery County Pay Equity Act does not prohibit the County from “relying on salary history voluntarily provided by the applicant to pay the applicant a higher wage than initially offered, if reliance on salary history does not result in unequal pay for equal work based on gender.”
- In certain jurisdictions an employer may not inquire about a candidate’s salary history either through asking the candidate directly or seeking that information through other means such as the candidate’s current or former employer. Maine’s law is one such example.
- In some cases, the law applies to internal employees. The State of Washington amended its law for companies with 15 or more employees to say, “Upon request of an employee offered an internal transfer to a new position or promotion, the employer must provide the wage scale or salary range for the employee’s new position. If no wage scale or salary range exists, the employer must provide the minimum wage or salary expectation set by the employer prior to posting the position, making a position transfer, or making the promotion.”
- Another tricky area, how salary and compensation are defined? Some jurisdictions clearly define salary or compensation in the law. Other laws simply state something like “an employer may not inquire about the compensation history of a perspective employee.” In those that do define salary and compensation, some laws include commission and benefits in the prohibition; while others exclude unvested equity or deferred compensation that an applicant would lose upon resignation from the ban.
- Some of these laws, California’s included, require that a pay scale be provided to a candidate upon request.
- Third-party recruiters are not exempt from these bans. For instance, Delaware specifically includes an employer’s agent in the ban.
- Michigan and Wisconsin, on the other hand, have placed bans on enacting a salary history ban law.
What is clear, with unique provisions in each state and local law, companies must continue to educate themselves especially if they have offices in multiple states or a growing remote workforce. Keep in mind that the applicable law may not be where the company is headquartered, but where the job or candidate is located.
With this legislation gaining momentum, even companies that are not located in a state or local jurisdiction with a ban are still encouraged to get ahead of the issue by evaluating compensation and hiring practices. This includes: reviewing all application documentation to make sure questions about compensation are removed, education and training for recruiters and hiring managers, and establishing pay ranges and benefits packages that are appropriate for the position and market.
Our Job as Recruiters
Third-party recruiters add value to our clients by bringing expertise on industry and market trends with regards to compensation and benefits. We can evaluate current and new positions so that job duties and requirements for work experience, skill-set and education are clear, and the job is set at the correct level within the organization. We help clients establish a pay range that is appropriate for the position, while also understanding the additional benefits outside of salary and bonus that the employer offers.
We also work with clients to streamline the interview process at the start of a search. Identifying clear interview steps and participants up front ensures a smoother process, which is especially important in a tight job market where a candidate may be entertaining multiple opportunities. This also creates transparency as candidates often ask what the interview process will look like and the approximate time frame for an employer making a decision. All interviewers, of course, should be alerted to the salary history inquiry bans and understand that they cannot ask or prompt candidates to provide current or historic compensation information.
As recruiters, we need to be clear that we will discuss pay ranges with candidates and how those ranges fit with candidates’ expectations. There will be times when the pay range will be below expectations. A candidate may decline to move forward in the process. There will also be times when a potential candidate shares that, while the budgeted compensation is below expectation, she is still willing to explore the role. People do take jobs for other reasons besides money. A better commute, more vacation time, a company’s reputation and culture, the opportunity to move into a new field, a better work/ life balance, the ability to work remotely, fantastic healthcare benefits, the desire to relocate, or an incredible project are all motivators. These front-end conversations with candidates ensure there are no surprises further down the line in the interview process.
As recruiters, the ability to have open conversations with employers and candidates about compensation expectations and motivations are key. This allows both sides to make informed decisions. In some cases, an employer may have to decide if they are willing to stretch the budget for a potential hire with higher compensation expectations. Candidates that really want a position will counter if an offer is too low. Candidates that have been underpaid in current and former roles will be enthusiastic about an offer and an employer that recognizes their true value and brings them up to market. In all cases, candidates should feel that they were treated with respect and integrity during the process and came out with a fair offer.
This article was written by Amy Bauer, Managing Principal, CA Search Advisors, LLC. CA Search Advisors is a national executive search firm, focused on the real estate industry. Our managing principals, Katie Becker and Amy Bauer, have a deep inside knowledge and extensive long-standing relationships as a result of working directly in the industries they serve. You can rest assured that you are in good care and in the hands of a firm you can trust. Let us bring the best talent to you!