pay equity By preventingemployers from questioning a woman's salary history to set paydecisions, the laws effectively force employers to value theposition rather than the person. (Photo: GettyImages/iStockphoto)

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Women working full time in the United States have historicallybeen paid just 80 percent of what their male counterparts arepaid. This gap in pay tends to follow a woman from job to jobbecause employers base a woman's future salary on her previous, inequitablesalary. Employers are blamed for perpetuating the gender pay gap and forcapitalizing on cost savings in the pay disparity rather thanclosing the gap by paying men and women equally for the sameposition.

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In an effort to combat this trend, many states and cities havepassed salary history bans as part of broaderlegislative efforts to prevent employers from under-paying women.States like California, Oregon, Massachusetts and Delaware havealready adopted salary history ban laws, and cities like SanFrancisco, San Diego, New Orleans, Pittsburgh, Albany, New YorkCity and Philadelphia have also joined the cause. Even Puerto Ricohas adopted salary ban legislation.  Some of these lawswent into effect in 2017, while others will go into effect thisyear and into 2019.

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Related: How much does discrimination explain the gender paygap?

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Earlier this year, New Jersey Governor Phil Murphy signed an executive order, effective Feb. 1, which bans stateagencies from asking applicants about their salaryhistory.  In Gov. Murphy's statement accompanying theexecutive order, he called the policy, “the first meaningful steptowards gender equity and fighting the gender pay gap.” Eleven morestates are expected to consider passing similar salary history banlaws in 2018.  Florida and New Hampshire already have payequity bills drafted for consideration in their respective 2018legislative sessions, which include bans on disclosure of pastsalary history.

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The penalties for violating the salary history ban laws can bepricey. In New York City, the fine for an “unknowing” violation canbe as high as $125,000, while the fine for a “knowing andcontinuing” violation can be as high as $250,000. In San Francisco,the fines for violating the “Parity In Pay” ordinance grows from$100 for the first offense, to $200 for the second offense, to $500for every offense thereafter. Employers located in Philadelphia canbe fined $2,000 per violation, plus jail time for repeat offenses.And in Massachusetts, affected workers can pursue class actionclaims.

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By preventing employers from questioning a woman's salaryhistory to set pay decisions, the laws effectively force employersto value the position rather than the person, and to look at themarket to determine a fair pay rate. Although well-intended, theselaws do not remove a discussion of salary from the equationaltogether. Employers can still query a female applicant about herearning expectations for the position that she is interested insecuring. This puts the candidate in the awkward position of havingto guess at what the employer may be willing to pay, which couldlead to qualified candidates being removed from considerationbecause their compensation expectations are too high, or causingcandidates to be underpaid because their guess was too low.

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The salary ban laws also create a host of risk issues, policyinconsistencies and expense increases for employers. While jobapplicants may voluntarily disclose their salary history levels toa prospective employer, employers are at risk for claims byapplicants who later claim that they did not voluntarily disclosethe information. Employers who hire an applicant at a higher salarymight face discrimination claims by another employee in the sameposition earning less money who was hired prior to the salaryhistory ban.

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Unable to rely on salary histories to set pay, employers areforced to expend resources in obtaining market data, surveys oranalytical programs to set the rate for a certain role, costs whichmight reduce other benefits the employer would otherwise offer toits workforce. Those employers that are unable to afford to expendadditional resources, are likely to simply guess at a fair salaryrange, and in doing so assume that a woman earned less than hermale counterpart. Also, a wrong guess could cost the employerexperienced applicants.

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The salary ban laws are going to force employers to rely ontheir recruiting agencies to advise them on market rate and toassist in creating accurate salary ranges for a position leveldepending upon several additional factors like demand andexperience. However, employers will not be able tocircumvent the salary history ban by relying on a recruiter toobtain that information for them. A recruiter working on behalf ofan employer to fill a position is, arguably, the employer's agentand therefore would also be prohibited from extracting salaryhistory from a candidate and sharing that information with theemployer.

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One of the primary concerns facing larger employers is how toremain compliant when the company operates in multiple states orjurisdictions. Some companies are simply adopting the salaryhistory ban as the benchmark for their company's entire humanresources policies even for their offices in states or cities thatdo not have salary history ban laws. Setting the trend forself-policing are the giant tech companies and major banks. Earlierthis year Bank of America joined Amazon and Wells Fargo by prohibiting itshiring managers across the country from asking prospective hiresabout their salary histories. This follows in the wake of similaraction by companies like Google, Facebook and Cisco, whichhave also decided to prohibit inquiries about salary history acrossthe board even though they are only required to abide by these lawsin those states that have adopted salary history banlegislation.

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While these companies cite administrative ease as a motivationfor adopting broad-based restrictions on inquiries about salaryhistory, they also note that the expanded policy is part of aneffort to create a culture of fairness and respect, and to helpaddress pay equity. That is, the policy expansion helps to ensurethat new hires are considered based upon individual qualifications,roles and performance, rather than how they may have beencompensated in the past.

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The demand for pay equality is only going to grow, continuing toput pressure on legislators at all levels to consider implementingsimilar pay-equity legislation across the country. Despite therisks, employers are well-advised not to wait for these laws to beenacted and enforced, but to take a proactive approach to payequity. Employers should revise their employment applications andrecruitment procedures to remove salary history questions.Employers should also revise their recruitment policy and hiringdocumentation to expressly state that the employer prohibitsinquiries about an applicant's current or prior earnings orbenefits.

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Human resources managers should also be trained on appropriateinterview techniques regarding compensation. For example, insteadof asking for salary history, a candidate should be presented withthe salary range set for a particular position, after which thecandidate can determine whether to continue with the hiringprocess. Since Jan. 1, employers in California are required toprovide the salary range for applicants upon reasonablerequest.

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Employers also need to educate their outside recruiters.Employers should instruct their recruiters and agents who verifyprior performance or perform background checks that they are not toinquire into an applicant's current or prior earnings or benefitson the employer's behalf, and that they are not to share any suchinformation with the employer.

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Someone's salary history should never affect their salary infuture roles. Employers who meet this challenge head-on andproactively set the tone for a culture of fairness and respect whenit comes to pay equity will be sending a clear message to currentand future employees that they strongly promote a productive workenvironment regardless of whether the state or city in which theyoperate has adopted salary history ban legislation.


Maddaloni and Flanagan are co-chairs of the Labor &Employment practice group of Schenck, Price, Smith & King,based in Florham Park. 

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