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The European Union has proposed a new law to ban employers from asking for their candidates’ salary history, in an effort to reduce gender and racial discrimination. Most companies already conduct background checks on potential hires, but the new rule would make it so that applicants wouldn’t be asked about past paychecks during interviews or job postings.
Wage history bans, or laws barring companies from asking job seekers about their salary history, have been enacted in numerous jurisdictions to help reduce pay discrimination. There are now 19 statewide and 21 local prohibitions in effect. Some businesses are revising their employment applications and business operations to comply, since each infringement may result in fines ranging from $100 to over $250,000.
Consider Zenefits if you need assistance managing labor law compliance difficulties. You’ll get access to a team of compliance specialists that will keep you informed about the human resource rules that apply to your company. If you find yourself exposed to a big law change, such as a salary history ban, you may utilize their pay handbook generator to overhaul your policies and processes.
Laws prohibiting the disclosure of salary information
A salary history is a record of an employee’s previous pay, which may contain information about additional perks received (bonuses, paid time off). New companies may request a job applicant’s wage history in order to take it into account when making a job offer. Since many states and municipalities have banned pay history queries, fewer companies are collecting salary information during interviews and on job applications.
Pay history prohibitions are governed by different regulations depending on where you live. California’s prohibition, for example, applies to the whole state. Employers are not permitted to inquire about a job applicant’s wage history; however, they are permitted to inquire about the applicants’ desired compensation range for the vacant position. Employers in New York State, on the other hand, are prohibited from obtaining compensation histories from new and present workers, and queries regarding projected salary ranges are not permitted.
Here are some broad guidelines to take in order to avoid breaking salary history prohibition laws:
- Asking candidates how much they made in their past employment is a no-no.
- Do not inquire about a prospective candidate’s wage history with their present or previous employment.
- Don’t inquire about the salaries of the prospects’ present or former coworkers.
- If you’re deciding how much to give a job applicant, don’t utilize any pay history information you get.
- Examine the specifics of any pay information prohibitions that your company must follow; make sure you’re authorized to inquire about salary expectations rather than presuming.
Keep in mind that restricting salary history is a very new notion. Updates to your state are subject to change at any moment, so check back often. Also, don’t assume that exclusions in one state will apply in another. The pay history restriction is governed by various regulations and penalties in every state and municipality.
State and local governments wage history bans
While there are no federal laws prohibiting employers from inquiring about current or former pay from job seekers or the firms for which they work, there are several state and municipal prohibitions.
It’s critical that you remain up to speed on local regulations; you don’t want to make the mistake of presuming that your state’s pay history restriction simply applies to state agencies when it has been expanded to include all employers.
There are presently 19 salary history prohibitions in effect in the state. Some employers are prohibited from obtaining salary history at all, from inquiring about salary history before making an offer, and from using salary history to determine compensation.
AS OF JANUARY 1, 2022, Rhode Island will join the list of states with salary history restrictions. When evaluating an application or deciding on compensation, employers in this state are not allowed to ask for or depend on wage history.
Salary History Questions are limited in certain areas.
In addition to the US territory of Puerto Rico, a number of cities have enacted laws prohibiting certain kinds of companies from asking for salary history information from job applicants. Some restrictions apply solely to municipal or county government bodies, while others encompass all companies in the jurisdiction.
Localities with a Salary History Ban
Some states that do not have statewide restrictions have implemented locality bans in certain counties or cities. Furthermore, even in places where a statewide prohibition is in force, communities within that state may have differing restrictions. Always double-check your local laws.
A few states, like Michigan and Wisconsin, have outlawed salary history prohibitions completely. The compensation information that companies obtain from job candidates during the recruiting process is not regulated by local governments in these states.
If your state or municipality has laws prohibiting the use of pay history in the recruiting process, make careful to look into the details. Some prohibitions apply solely to firms with a particular number of workers, while others apply only to employers in cities or counties.
Pay History Ban Laws: How to Comply
Complying with salary information prohibitions may seem difficult at first, but it will become a lot simpler if you analyze your recruiting process, rules, and procedures. The greatest thing you can do is to keep wage history talks out of the application, interview, and job offer processes. Before making any modifications, go through your hiring processes numerous times. Each stage in the process that exposes your firm to non-compliance must be identified.
Here are some things you can do to be sure your organization doesn’t break the pay history ban:
- Requests for wage information should be removed from all job applications.
- All job interview scripts should be free of pay queries.
- Your human resources and recruitment teams need to be retrained.
- Post labor law posters with salary ban laws in places where job interviews are often held and where your human resource department spends time.
- Set up a mechanism to track how new workers’ hourly pay and salary amounts are calculated.
- Review and update any print and electronic employment practices to ensure compliance with your state’s legislation.
- Before accepting a job offer, compare salaries on a job search site.
Consider utilizing Indeed if you need assistance filing a new job. It’s the world’s biggest job board, including wage comparison tools to aid in the creation of new job offers.
Salary History: How to Avoid It in Interviews
Focus on the candidate’s ability to execute the job instead of asking about income during a job interview. Use your imagination to come up with case-study questions that will put their reasoning to the test on the spot.
It’s also a good idea to enquire about the outcomes of your job prospects’ previous positions. A résumé is useful for displaying an applicant’s prior job titles and responsibilities, but determining how effectively they did may need more investigation.
Your objective should be to collect as much information as possible to assist you in determining if the applicants are a suitable match for the position. Just because they were paid $10 an hour for identical work in the past doesn’t imply they shouldn’t be paid the $50,000 per year that their expertise is now worth.
Penalties for Breaking Salary History Question Bans
Violations of the pay history prohibitions may result in fines of up to $250,000, depending on state and municipal legislation. Some jurisdictions have yet to establish explicit punishments, while others impose restitution, civil fines, and even reinstatement of job candidates who were fired on the basis of unlawful grounds (salary history).
Here are some examples of how the laws differ:
- For their first offense, employers in San Francisco are issued a notice and a warning. They might be fined up to $100 for a second violation within a year of the first, and employers could be fined up to $500 for any consecutive offenses (still within those 12 months).
- Employers may be fined up to $5,000 for each infraction of the new statewide rule (before, Chicago was the only Illinois city that prohibited salary history inquiry). If the court concludes that the employer behaved with malice, they may be entitled to “special damages” of up to $10,000.
What Was the Cause of the Salary History Ban?
Massachusetts was the first state to make it illegal for a prospective employer to inquire about wage history before making a job offer in 2016. Several other states have now followed suit, establishing their own statewide pay history prohibition statutes that apply to all companies. The prohibition of salary history arose as a means of addressing prior wage disparities that disadvantaged workers owing to their gender, color, background, and other factors.
Employers are forced to determine compensation based on other variables when they are prohibited from asking prospective new recruits for salary information. To guarantee that you pay new workers fairly, you should examine their work experience and qualifications in addition to the market worth of their skill sets.
The Paycheck Fairness Act prohibits salary discrimination based on gender (including pregnancy, sexual orientation, gender identity, and sex characteristics).
Who is the most affected by pay discrimination?
Women and minorities aren’t the only ones that suffer from pay discrimination. Pay disparities affect a wide range of different populations. Many studies have demonstrated that particular demographics earn less on average than their peers for performing the same work overtime. According to a PayScale statistics estimate, women will receive 82 cents for every dollar earned by men in 2021. When the same work and talents were compared, women received 98 cents for every $1 earned by males. According to the study’s findings, minority men and women earn 69 cents to 89 cents for every dollar made by a white man. When the same job and skill set were compared again, the average jumped to 98 cents to 99 cents for every dollar earned by a white guy.
Job seekers who have been subjected to pay discrimination at any stage in their employment will often see a long-term effect on their salaries. This implies that companies that utilize a job applicant’s wage history to decide how much to pay them may be perpetuating pay discrimination by presuming (often mistakenly) that they are being paid fairly in the first place. And the truth is that many workers who identify as members of disadvantaged groups (women, minorities) are underpaid now or in the past.
The following are some of the most prevalent categories of persons that face salary disparities:
- Minorities. This may include anybody who is a member of a group that does not fit in with the majority. Typically, the phrase “minority” refers to people of various races and ethnicities, such as African Americans, Hispanics, and Latinos.
- Women. Over the years, there have been salary disparities between men and women in all professions.
- Employees have a gap in their employment history. Employers may sometimes wrongly assess and undervalue job prospects who have had a long break between employment.
- Candidates with criminal backgrounds are not eligible. Many businesses will not recruit people with criminal records, and those that do will save money by paying them less. As a result, the “Ban-the-Box” policy was implemented.
- Applicants with special needs. Some companies believe that disabled candidates would be unable to execute their tasks as effectively as others, thus they will pay them less. You should be aware that discrimination against people with disabilities, including salary discrimination, is illegal.
- Parents who are single. Single parents are more likely to face discrimination than parents in two-parent households since they are responsible for managing their employment and households on their own.
- Non-Christians. Although people’s religious (or non-religious) choices are growing increasingly varied, some employers still maintain biases towards non-Christians, such as Muslims or Buddhists. This form of religious discrimination is illegal under the law.
Many states, towns, and counties have implemented the “ban-the-Box” policy, which allows job candidates to be appraised solely on their credentials before any prior records are considered. Employers that are subject to this rule are required to delete any queries concerning criminal records from employment applications. Some businesses are also forced to wait until later in the recruiting process to conduct background checks.
Conclusion
Employers are prohibited from asking for information about job candidates’ previous wages under salary history prohibitions. They were established to fight wage discrimination, and many states and towns have implemented them. Employers should do a thorough study about the exact ban that applies to their company in order to avoid paying thousands of dollars in fines.
Frequently Asked Questions
Can employers ask about salary history?
The Fair Labor Standards Act does not allow employers to ask about your salary history. However, the Equal Pay Act has a provision that allows for companies with 20 or more employees to pay male and female workers differently if their duties are different.
Are salary history bans effective?
Salary history bans are effective in that they prevent people from finding out what you make and potentially deciding to not hire or work with you. However, the salary history ban is only a temporary measure for employers who may want to investigate an applicant further before making any decision on whether or not they should hire them.
