Finance News & Insights

Proposed law would bar companies from asking about salary history

Heads up: There’s new legislation pending that could have a substantial effect on your employee salary structure.  

According to pay experts, women and minorities are often at a disadvantage to earn equal pay from the moment they apply for a new job — but a new law is aiming to even the playing field. 

Rep. Eleanor Holmes Norton, (D-DC), and co-sponsors Reps. Rosa DeLauro (D-CT) and Jerrold Nadler (D-NY), are presenting legislation to Congress that would prevent employers from asking job applicants to provide a salary history.

Why is asking about salary history a problem — and how does it contribute to the pay gap?

According to Norton:

“Many [women and minorities] carry lower salaries for their entire careers simply because of wages at previous jobs that were set unfairly. Our bill will require employers to offer salaries to prospective employees based on merit, not gender, race or ethnicity.”

Massachusetts, New York and California

Even if it’s passed, the federal bill won’t be the first law barring questions to job applicants about their prior salary history.

On the state level, Massachusetts just signed a pay equity law forbidding such questions and making it the first state to put such legislation into effect.

Plus, there are other similar laws pending approval.

Example: There’s a law in California that’s awaiting the governor’s signature (or veto) that would prohibit hiring managers from asking candidates about their current pay, as well as ban employers from using salary info to justify a difference in pay between men and women in similar positions.

In New York city, a recently introduced amendment to New York City’s Human Rights Law would prohibit city employers from both asking for or relying on a job candidate’s salary history when making pay decisions.

Of course, there’s a vast difference between state and local laws and a sweeping federal legislation.

The downside for employers

Not everybody is crazy about the idea of a law that keeps employers in the dark about perspective employees’ salary histories. You know why: The responses to salary history questions allow employers to find out if a job applicant’s current salary exceeds what they’re willing to pay.

And if a MA-like federal law does take effect, it will have an immediate direct impact on HR pros — a group who is already stretched thin trying to comply with the upcoming FLSA and ACA changes.

For example, should a law prohibiting salary-based questions take effect, employers would need to at a bare minimum:

  • update job applications to remove salary history questions, and
  • train hiring managers not to ask salary-related questions.

Regardless of the outcome of this legislation, it’s probably a a good idea to conduct a self-audit of pay practices, paying close attention to any discrepancies between employees in similar positions. If you can’t explain – through solid documentation – any discrepancies in pay through common factors, then you may have to make some changes.

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