As salary history bans continue to be enacted throughout the U.S., our clients are expressing increased anxiety over how exactly they should comply with this aspect of the pay equity trend sweeping the states.
The reason for the confusion? Most of the laws prohibit employers from requesting compensation information without specifically defining what that means.
For example, California’s version of the law prohibits employers from requesting and relying on salary history information, unless disclosed voluntarily by the applicant (without prompting), including questions about past “compensation and benefits.” In the absence of legislative guidance or regulations defining “compensation and benefits,” to avoid risk, employers should consider stock options and deferred and variable compensation as part of the broad category of salary history information.
In fact, while equal pay laws vary by state, employers looking to create a national practice or policy related to salary history should avoid questions about any form of compensation or benefits history.
In fact, while equal pay laws vary by state, employers looking to create a national practice or policy related to salary history should avoid questions related to any form of compensation or benefits history. And, unless or until further guidance is issued to the contrary, the list below should be considered part of compensation history:
- Deferred and variable compensation.
Returning to California, while California’s laws now prohibits employers from asking about or relying on prior salary information in deciding whether to offer a job and setting pay, the law does permit employers to consider salary history information if an applicant, “voluntarily and without prompting,” discloses the information.
However, we caution all employers who choose to base starting salary on voluntarily disclosed information to keep in mind that the California Fair Pay Act (Lab. Code § 1197.5(a)(2)) precludes employers from relying on prior salary, by itself, to justify any gender, ethnicity or race-based disparities in pay.