September 19, 2017
Authored by: Sarah Holdmeyer
Many employers base an employee’s pay on his or her past salary. Applicants are typically asked, either on the application or during an interview, how much they made in their previous job(s). Critics of this practice believe using salary history to set current salary is discriminatory and prohibits women and minorities, frequently paid less than their white male counterparts, from overcoming pay disparity.
In April 2017, in Rizo v. Yovino, the 9th Circuit Court of Appeals held that salary history is a valid justification for paying a female employee less than her male counterpart, so long as the employer’s use of the salary history was reasonable and accomplished a business purpose. Several states and municipalities, perhaps in response to Rizo, have enacted and/or proposed legislation prohibiting the practice of asking applicants about their salary history. Other states and municipalities previously banned this practice.
In June 2017, both Delaware and Oregon passed statutes prohibiting an employer from asking an applicant his or her past salary, either on the application or during the interview. They join Massachusetts, New York City, San Francisco, and Puerto Rico, with similar bans. California, Mississippi, Pennsylvania, and New Jersey have also proposed similar bans. Philadelphia passed a pay history ban, which its Chamber of Commerce sought to enjoin on the grounds that the ban would cause employers to struggle to establish wages and attract top talent. The Eastern District of Pennsylvania dismissed the Chamber’s injunction for lack of standing.
As the equal pay debate continues, the states and municipalities prohibiting past salary inquiries during the interview process will likely increase. Employers must comply with these new prohibitions or face the penalties imposed by the various statutes. For example, a violation of the San Francisco “Parity in Pay” ordinance will cost employers $100 for the first violation, $200 for the second, and $500 for each additional violation. A violation of New York City’s ban could cost employers up to $125,000 for an unintentional violation and $250,000 for a willful violation. In jurisdictions with enacted bans, employers should review their applications and interview procedures to ensure compliance. Employers who are not located in these jurisdictions may still want to look at their hiring practices to determine whether salary history information is relevant, i.e., a true indicator of the value of the position. Employers should evaluate all the information used to make employment decisions to ensure it relates to the person’s qualifications and ability to do the job.
Bryan Cave LLP has a team of knowledgeable lawyers and other professionals prepared to help employers assess their hiring practices. If you or your organization would like more information on any of the states or municipalities who have enacted salary history bans or any other employment issue, please contact an attorney in the Labor and Employment practice group.