A wave of new legislation continues to span the country as states ban questions about salary history to help close the gender pay gap. This wave of new equal pay protections at the state and local levels is not slowing down and seems to contradict the direction the Trump administration has gone on this issue, peeling back many of the equal pay initiatives previously introduced during President Obama’s time in office. Most recently, Massachusetts put a new gender equal pay law (Senate Bill 2119) into effect on July 1; it was the first new law of its kind for the state since 1945.
The Obama administration had identified equal pay initiatives as one of its priorities, and in June 2016 launched the Equal Pay Pledge, which encouraged companies to take action to advance equal pay. Many companies signed on, and as of December 2016, more than 100 companies had signed the pledge, including Patagonia, Estée Lauder, InterContinental Hotels, Mastercard, Yahoo, Square and Zillow. However, after the presidential election, the White House Equal Pay Pledge was removed on Jan. 22, 2017, almost immediately after President Trump took office. Similarly, on Aug. 29, 2017, the Trump administration put a halt to the proposed new EEO-1 form and equal pay data collection initiative, which had been introduced during the Obama administration, citing the need for further review. The proposed new EEO-1 form sought to collect significant pay data, among other information, as means of encouraging greater pay transparency in providing various government agencies with additional tools for enforcement of equal pay initiatives. For now, both of the aforementioned initiatives are on hold with no sign of any attempt to revisit or revive either.
The new salary laws are merely a subset of the wider federal and state pay equity laws aimed at abolishing wage disparity based on sex. The federal Equal Pay Act was first enacted more than 50 years ago. 28 USC § 206(d). Of important note, the Equal Pay Act applies only to employees based on “equal work” in jobs requiring “equal skill, effort, and responsibility.” Under the Equal Pay Act, employers are entitled to an absolute defense where the difference in pay is based “on any factor other than sex,” yet much dispute exists among the various circuits in the application of the law. For example, the “any factor other than sex” affirmative defense has been subject to considerable litigation, as federal courts are split on whether the “factor other than sex” defense is subject to reasonableness review. The Seventh, Eighth and Ninth circuits have held that an employer’s reliance on an employee’s prior salary history to set salaries qualifies as an affirmative “factor other than sex” defense, while several other circuits have limited the extent to which employers may rely on prior salary histories, in some cases requiring more “legitimate” business reasons.
With the same goal in mind, many states and municipalities have enacted similar laws limiting the extent to which private employers may inquire and rely on a candidate’s prior salary history in determining employee salaries. These state and local salary laws are aimed at reducing wage discrimination and the resulting gender pay gap by prohibiting employers from relying on salary history and forcing them to consider objective criteria specific to the applicant’s qualifications and the position. This, of course, is based on the rationale that reliance on an applicant’s salary history only perpetuates existing pay differences that have resulted in the increasing gender-based pay gaps.
The trend started in 2017, when several jurisdictions, including the cities of New York and San Francisco and the states of California and Delaware, approved bans on salary history inquiries. The purpose of these laws was to prevent the continuation of pay disparities that may have affected female applicants in their work experiences prior to seeking employment with a new company. On May 4, 2017, New York City signed into law New York Local Law 67 (Local Law 67). The law, which took effect on Oct. 31, 2017, prohibits prospective employers from asking job applicants about their salary history and makes it unlawful for an employer to make any salary inquiry of an applicant, the applicant’s current or former employer, or a current or former employee or agent of the applicant’s current or former employer. Under Local Law 67, an employer is also prohibited from conducting any form of search through publicly available information for a prospective employee’s salary history. Under Local Law 67, “salary history” includes not only an applicant’s current or prior wage, but also benefits and any other form of compensation he or she may have received. The law, however, allows an applicant to voluntarily disclose his or her salary history, at which time this information can be used to determine salary, benefits and other compensation, and the employer may verify the salary history.
Approximately a month later, on June 14, 2017, Delaware signed into law Delaware House Bill 1 (HB 1), which took effect on Dec. 14, 2017. HB 1 also prohibits prospective employers from asking job applicants about their salary history. Based on the same rationale, similar measures were enacted in Oregon, New York and Philadelphia. Unlike other laws, though, HB 1 does not specifically prohibit employers from setting compensation based on prior salary history if job applicants voluntarily disclose their prior compensation history. It only prohibits the employer from inquiring about it.
Later that year, on Oct. 12, 2017, California signed into law Assembly Bill 168 (AB 168), which took effect on Jan. 1, 2018. The California law prohibits employers in California from seeking the salary history information of a prospective applicant. Salary history information includes both an individual’s rate of compensation as well as other benefits. AB 168 also prohibits an employer from considering or relying on salary history information in making a salary determination. However, AB 168 does not preclude a prospective applicant from “voluntarily and without prompting” disclosing his or her salary history. In such circumstances, the employer may consider and rely on that history in setting that applicant’s salary.
As noted, the most recent of these state laws was the Massachusetts Pay Equity Law, which went into effect on July 1 and is consistent with much of the legislation introduced during the past two years in other states, aimed at closing the gender wage gap. Specifically, the new Massachusetts law will impose significant responsibility on all Massachusetts employers to ensure equal pay for different genders for comparable work. Among its provisions, the law broadens the definition of equal work, extends the statute of limitations, strengthens the penalties and demands greater transparency in pay practices.
All these state laws are relatively new, and as a result there is little to no precedent or guidance for employers trying to comply. It is therefore crucially important for companies to closely monitor the new regulations and adjust hiring practices to ensure compliance by eliminating interview questions related to a candidate’s prior salary history. Depending on the state or local ordinance, some of these regulations are allowing for reliance on salary information voluntarily disclosed by the candidate or do not prohibit asking about the salary history after making the offer of employment. Also, employers should be mindful of the city and local ordinances focusing on the same issues. For example, employers in San Francisco are also prohibited from seeking information on an applicant’s “monetary emoluments.” Likewise, New York City employers are not only prohibited from asking applicants for their salary history but also are prohibited from asking an applicant’s former employers or searching public records to learn about the applicant’s current or prior earnings or benefits. Therefore, it seems that the trend is increasingly moving toward eliminating all inquiries about and any and all reliance on a candidate’s salary history.
Mandana Massoumi is a partner in the employment and labor practice at Manatt, Phelps and Phillips. She handles a wide range of matters, including claims brought under the Fair Labor Standards Act, various provisions of the California Labor Code, the National Labor Relations Act, ERISA and various whistle-blower statutes. She also advises clients on various labor and employment issues, including wage and hour matters and reasonable accommodation under the Americans with Disabilities Act, the Family Medical Leave Act and the Fair Employment and Housing Act.