The Salary History Problem

An interesting mix of states now ban or otherwise restrict employers from requesting applicants’ prior compensation. Now, don’t run off and start rewriting your application forms just yet, the restrictions are mostly for government jobs, but there are a handful of cities and states that outright ban asking for compensation history.  But this does beg the question; why is there a non-partisan move to restrict an employment question? Some employers may choose to implement the ban voluntarily if the answer to that question is compelling. (Spoiler: it’s a hard call)

The Background

Unlike other popular employment movements over the last decade, it’s very difficult to predict what areas of the United States are passing this type of legislation. While there is nothing particularly surprising about states passing laws on the hiring process- e.g. disability information and some criminal records, try to think of any other state-specific employment law where Alabama and California march together on the vanguard. To be safe, all employers should be sure to consult the laws of any state they operate in and even check city/county laws on the issue to see if they are operating in one of the 30+ communities with at least a partial restriction on requesting salary history.

While this salary history question is still being debated, the Equal Pay Act is not. For half a century the EPA has made employers liable for certain types of pay inequity. The salary history bans aim to address this same “equal work equal pay issue.” Labor statistics still report an 18% difference (overall) between women who were full-time wage and salary workers and male full-time wage and salary workers. It’s not hard to find starkly different opinions on why this is still the case. I’ll leave you to explore those yourself in fear of stepping on a political landmine.  Regardless, the logic here may be obvious now, if a person is unlawfully underpaid in previous employment, that salary can carry over to a new employer simply because it is using the past salary as a jumping-off point.

Will this Work?

These salary history bans are simply too recent to measure if they are having the intended effect. That makes voluntarily giving up hiring data a hard ask. But one useful note is that relying on past salary information will not serve as a defense if an employer is accused of unlawful pay disparity. All sized employers will still need to self-audit their compensation to measure any differences in pay for protected classes. A good rule of thumb is to focus on paying for skill set rather than past salary regardless if you are subject to the new restrictions.