Banning salary inquiries during the hiring process is an essential step towards leveling pay disparities, fostering pay equity, and creating
a more inclusive workplace environment. In this article, we’ll explore the origins and efficacy of salary history bans, the jurisdictions where they are currently in effect, and how your organization can prepare to modify its hiring process to ensure ethical compensation determinations and legal compliance.
Origin of Salary History Bans
With the primary goal of narrowing the gender wage gap and addressing other forms of bias, a number of states and municipalities have enacted legislation or ordinances to limit or forbid the use of salary history inquiries during the hiring process. Many women begin their careers earning less than men, especially when their compensation is based on previous salaries, and this pay discrepancy typically persists even as women advance in their careers. A salary history ban protects job candidates and prevents employers from exercising bias in the hiring process by basing compensation decisions on earnings from past positions.
Conducting salary inquiries is considered unethical, particularly when an applicant has already experienced pay/workplace discrimination, has experienced work disruptions due to caregiving responsibilities, has experienced a layoff, or has received pay in a prior position that did not match their qualifications, experience, or comparable pay in the wider labor market.
As we’ll explore, since there are no federal regulations that limit or eliminate the use of salary history bans, local and state regulations vary in scope. Currently, some states and municipalities entirely forbid salary inquiries and penalize any form of employer retaliation for employee non-disclosure. In most other states, no regulations exist or regulations exclusively apply to public sector employees. Finally, in two states, there are express bans on salary inquiry bans themselves.
Although salary inquiry bans remain a contentious issue, a number of studies confirm that salary history bans are effective in closing the gender pay gap. One University of Chicago study demonstrates that women over the age of 35 benefit most from salary history regulations (and experience the greatest earnings increase), particularly women who are married and have caretaking responsibilities or children over 5 years old.
States with Salary History Bans
Let’s explore the states where limited or comprehensive salary history bans are in place, as well as jurisdictions where salary history bans are themselves forbidden by law.
In all of the following states, districts, or commonwealths, it is illegal to request (verbally or in writing) compensation history information during any stage of the hiring process:
Alabama, California, Colorado, Connecticut, Delaware, District of Columbia (D.C.), Hawaii, Illinois, Maine, Maryland, Massachusetts, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Puerto Rico, Rhode Island, Vermont, Virginia, and Washington.
It’s important to remember that the extent of these laws vary by state, commonwealth, and district. For instance, in Colorado, the salary inquiry regulations are rigorous, forbidding employers from asking about prior salary; using prior salary (even if voluntarily disclosed) in hiring or compensation decisions; and retaliating against potential employees who refuse to disclose their compensation from past positions.
Although a large number of states have contributed to the growing momentum of salary inquiry bans, two states – Michigan and Wisconsin – have uniquely forbidden the use of salary history bans, with some exceptions for state departments and autonomous agencies.
Local and County Pay History Bans
When considering salary inquiry bans that are effective in your jurisdiction, remember that some local or county salary history laws differ from state ones – expanding on or diminishing regulatory measures. For example, in Columbia, South Carolina, employers may consider a candidate’s compensation history if it is voluntarily disclosed, while a county law in Richland County, South Carolina, mandates employer removal of any salary history inquiries from employment screenings, verbal interviews, or employment applications.
In some states like Utah, where a state-wide salary history ban is not in place, Salt Lake City, Utah, explicitly forbids the consideration of prior salary information in the hiring process even if it is voluntarily disclosed. Similarly, in Toledo, Ohio, some municipal salary inquiry regulations are in place, but they are limited to organizations with 15 or more employees.
Complying with Salary Inquiry Laws
Ultimately, with so much variation in local, state, and county laws, each organization must make an executive decision to determine its own policy on salary inquiries based on organizational values and the regulations that apply to the jurisdiction(s) where it operates.
However, it is advisable to simply refrain from conducting salary history inquiries at any stage in the hiring process to embrace equitable hiring practices, ensure fair wages for all of your employees, prevent discrimination, and avoid potential lawsuits or penalties. It’s also essential to educate your hiring managers about any new policy you adopt and – if any local, county, or state bans already apply – to post notices in areas where in-person employment interviews could be conducted. In any case, a range of ethical verification services remain available to employers to vet job candidates, attract top talent, ensure informed hiring decisions and contribute to a comprehensive background screening.
Forthcoming Legislation and Regulations
Regardless of the salary inquiry policy your organization adopts, it’s wise to be aware of federal laws and regulations that may be forthcoming. Recently, the U.S. Office of Personnel Management, OPM, introduced a pay equity proposal that would restrict hiring managers in the federal government from conducting salary inquiries with job candidates. Enactment of this rule could impact more than 1.5 million federal positions.
Additionally, the Paycheck Fairness Act was recently reintroduced in the House of Representatives and would create a federal/nationwide ban on salary history inquiries while increasing equal pay protections, compensation transparency, and penalties for employers that retaliate against job candidates for non-disclosure of past salaries.
Given the growing momentum of municipal, county, and state bans, it’s more important than ever for employers across industries to institute salary inquiry policies that embrace equitable pay and anticipate various forms of federal legislation that are likely to arrive in the near future.
Compliant, Expedient, and Ethical Hiring with The Orsus Group
Understanding the local, county, and state labor laws that apply to your organization is an ongoing challenge, but you can take proactive steps towards embracing pay equity and adopting ethical hiring practices. Equitable hiring improves company culture, employee retention, company reputation, and ensures long-term legal compliance. Contact The Orsus Group today to learn how our compliance solutions can guide you through this process.