News & Insights

Proscribing Use of Salary History in Hiring

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On August 1, 2016, Massachusetts became the first state to bar employers from asking about applicants’ salaries before offering them a job or having policy that prior wage or salary history meet certain criteria. See here. Charlie Baker, the Governor of Massachusetts, is a Republican and that legislation was bipartisan.

Federally, we hear talking points premised on “pay inequality” (by both the Republican and Democrat candidates) in Presidential debates. Moreover, it seems that a bill will be introduced in Congress on this issue – sponsored by Democrats from District of Columbia, Connecticut, and New York. See here (explaining it as “to help eliminate gender and racial pay gap by prohibiting employers from seeking salary history”).

On May 2, 2016, we blogged about a new bill, in Delaware, prohibiting employers from forbidding employees from disclosing their wages with other employees. See here. Since then, on June 30, 2016,  that bill became law. See here.

Delaware’s current, new law has its roots in labor law – i.e., that employees discussing their wages with other employees is a form of concerted activity… union-type activity. Indeed, the NLRB and President Obama, in an Executive Order from April 2014 (applicable to Federal Contractors) took the position that such a prohibition is impermissible. Delaware’s law codifies that prohibition, for employers having four or more employees. It applies regardless of whether the employer is unionized and even if the employer does no contracting with the Federal Government. If employers in Delaware have not done so already, they should check their handbooks/ policies and revise them if necessary. In our experience, that now-unlawful prohibition is a fairly common policy.

The Massachusetts law (and the one emerging in Congress) is not a matter of concerted activity. Such legislation extends beyond discussions among employees. Rather, such legislation is premised on addressing a “wage gap between men and women” (and perhaps between different races) and that when employers ask prospective employees for their wage or salary history, it perpetuates disparities in pay based on gender (and perhaps race) from one job into another. Based on that premise, the Massachusetts law, among other things (including deleting a definition of “woman”), makes it an unlawful practice for an employer to “seek the wage or salary history of a prospective employee from the prospective employee or a current or former employer or to require that a prospective employee’s prior wage or salary history meet certain criteria.” That law permits the filing of suit without first filing a charge of discrimination.

Some might argue that a business can innocently (and consistent with its objective of making profit) endeavor to procure the best talent for as little as possible; and that a step in doing so might reasonably include asking applicants to disclose the amount that they previously made… and that doing so should remain lawful. Indeed, some might argue that this helps a business (devoid of any bias) find the best talent who is most likely to accept as little as possible. Moreover, some businesses might believe that there is wisdom in making applicants unqualified who, in their most recent job, made/ make above a certain amount. While employees might actually have a variety of reasons for being willing to accept less in a new job, from certain employers’ perspective, the policy of disqualifying applicants who make above a certain amount is prudent because “overqualified” candidates might be more likely to be unhappy taking a position that pays less than what they have recently made or make at the time of applying (even if the applicant says or even thinks otherwise). In any event, some might argue that a policy that is made illegal under the Massachusetts law (i.e., requiring that a prospective employee’s prior wage or salary history meet certain criteria) should remain lawful.

If the recent past is any predictor of the future, employers might expect to see similar legislation in Delaware as has become law in Massachusetts and as apparently will be introduced in Congress. Indeed, these days, it seems that if you look away for a minute, in Delaware, a new employment law (restricting employers and creating potential legal liability… especially for the under-informed) might emerge.

Might we see such a bill introduced in the Delaware General Assembly? Should an employer be able to ask prospective employees for their salary history? Should an employer be able to have a policy that disqualifies an applicant who makes more than a certain amount? Should an employer… a private company… face legal liability for such things? If so, should an employee need to file a charge of discrimination before seeking relief in court?

As always, I leave it to readers to decide what they think. Whether you think this law is good for people, bad for business, or otherwise, you should make your opinion known… and get involved, because this is happening now (at least in other states, apparently in Congress, and maybe in Delaware)!

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