October 12, 2017

New Labor Code Section Prohibits Employers From Requesting Salary History

Negotiating a starting salary is one of the most nerve-wracking aspects of looking for a job. It can be especially vexing for women working in majority-male professions such as science and technology.

Recent changes to California’s Fair Pay Act, which came into effect January 1^st, 2017, bar employers from paying a higher salary to members of one sex over another. This change is a step in the right direction for closing the gender-wage gap, surely—especially since it’s coming coupled with Assembly Bill 168.

This bill, soon-to-be California Labor Code § 432.3, supplements the Fair Pay Act amendments by preventing employers from requesting a candidate’s salary history before hiring them.

The Fair Pay amendments strengthened California’s commitment to closing the gender wage gap and was a powerful public statement; nevertheless, they left open a loophole which Assembly Member Eggman (D-Stockton) intended to close.

[i]

She introduced Assembly Bill 168 to the assembly floor in January of 2017, shortly after the new Fair Pay Act amendments took effect. As of September 25^th, 2017, Assembly Member Eggman’s bill passed the State Assembly and Senate and has been passed to Governor Brown’s desk.

The loophole left by the Fair Pay Act meant that though employers could no longer pay employees of different sexes who perform “substantially similar” jobs unequal wages or salaries without a rational basis, the amendments failed to account for the fact that women have, on average, earned less than their male counterparts. Therefore, an employer could explain away gendered pay disparities by stating that salary history was a sufficient rational basis for unequal pay between two employees performing substantially similar work.

As of 2015, California’s wage gap between men and women was a median of $7,227/year.[ii] Many factors influence this disparity; preventing salary disclosure will mitigate one of the factors that currently impedes women from achieving higher salaries in their preliminary negotiations for a job.

Labor Code § 432.3 would prevent this by making sure that employers will not know a potential employee’s salary history before offering them a job. Even state and local government employers would be prohibited from seeking salary history information about an applicant for employment, except as otherwise provided.

Moreover, the bill would require an employer, except state and local government employers, upon reasonable request, to provide the pay scale for a position to an applicant for employment.

The two provisions—preventing an employer from requesting salary history and requiring that employers report salary information—are hoped to eliminate salary momentum whereby an individual’s lower salary in one job carries forward to subsequent jobs that request salary history. Proponents of the legislation contend the rule would force employers to make hiring decisions based on a candidate’s credentials, experience, and personality rather than based on his or her salary history. Moreover, proponents emphasize that nothing prohibits a candidate from disclosing the information if desired.

Some critics argue the bill is overly restrictive in that it impedes an employer from requesting a key category of information—prior salaries. This lack of information will make it more difficult for employers to ensure they are providing an attractive compensation structure.

Other critics argue it does not go far enough. Employers will attempt to circumvent the legislation by offering a signing bonus to some candidates but not others, by increasing the salary post-hire, or by several other methods.

[i] http://equalmeansequal.com/the-gender-pay-gap/

[ii] http://www.latimes.com/business/la-fi-equal-pay-day-20170404-story.html