What Can You Ask About an Applicant’s Salary History?

It is no secret that salary inequality exists in the United States. Many decades after the passage of federal and state laws that prohibit employers from discriminating based on gender and race, gaps persist between the earnings of men and women, and racial minorities earn less on average than white employees. When salaries are based at least in part on an applicant’s earnings history, past pay inequities continue, creating ongoing imbalances unrelated to the applicant’s qualifications or the requirements of the position.

In recent years, several states, counties, and cities have passed new laws to combat pay inequity. “Wage transparency” laws have established the rights of employees and applicants to discuss their compensation with one another. In addition to these laws, which limit private employers’ ability to restrict their employees’ speech, some legislatures have enacted laws that restrict private employers’ speech by making it unlawful for them to ask job applicants one common question: “How much do you make at your current job?”

State laws prohibiting private employers from asking job applicants about their salary history are currently in effect in California, Delaware, Massachusetts, Oregon, Puerto Rico, and Vermont. Connecticut will join the list on January 1, 2019. At the municipal level, New York City and San Francisco have their own laws banning salary history inquiries. Philadelphia was the first U.S. city to implement a ban, but as explained below, it is no longer enforceable.

The statutory text in each jurisdiction differs, but the measures are based on similar rules and principles. Employers can no longer ask applicants about their current or past rate of pay and benefits, such as health insurance, retirement plans, commissions, equity, and bonuses. Employers also may not ask the applicant’s current or past employers for this information. New York City has even published guidance  (opens in a new tab) declaring that employers are prohibited from searching public records of the applicant’s compensation history.

In most of these jurisdictions, even if the applicant voluntarily discloses his or her prior compensation, or if the employer accidentally stumbles on the information, the employer may not use it to set a compensation package for the applicant. Only California’s and New York City’s laws allow employers to rely on voluntarily disclosed information in setting compensation.

These laws prohibit employers from asking about past or current compensation only. There is no prohibition on asking about an applicant’s salary and benefits expectations for the future.

Focus on Expectations

These laws prohibit employers from asking about past or current compensation only. There is no prohibition on asking about an applicant’s salary and benefits expectations for the future. Employers may also ask about any competing job offers the applicant has received and the value of the compensation that was offered. After making an offer, an employer may ask about the employee’s history, including a full description of compensation.

In some jurisdictions, including California and New York City, the only lawful communication of an applicant’s salary history is from the applicant, “without prompting.” This means that neither the prospective employer, nor the applicant’s current or former employers, can ask about—or encourage the applicant to disclose—his or her salary history.

The San Francisco ordinance permits job applicants to provide written authorization to their past employers to disclose salary history to prospective employers, but the authorization must still be made without prompting under state law.

Uncertain Future

Despite the increasing number of jurisdictions enacting laws prohibiting employers from asking applicants about their salary histories, the enforceability of these laws is in doubt, particularly after a federal court in Philadelphia threw out the city’s ban.

In that case, the Chamber of Commerce of Greater Philadelphia challenged the constitutionality of Philadelphia’s ordinance, claiming that its restrictions on employers’ speech violated the First Amendment. The federal district court agreed and, in April 2018, issued an injunction preventing the enforcement of the law’s restrictions on salary history inquiries. However, the court kept intact the law’s provisions that prohibited employers from using applicants’ compensation history to set compensation, since that part of the law did not implicate employers’ speech rights.

Both sides have filed appeals with the U.S. Court of Appeals for the Third Circuit, where the case is currently pending. It may not be long before legal challenges are brought against other similar measures. Additionally, at least two states, Michigan and Wisconsin, have enacted laws that prevent municipalities from enacting their own bans on salary history inquiries.

For the time being, associations should remain mindful of any salary history inquiry bans that may apply to them and ensure that their hiring practices and procedures comply with the law. In addition, the bans are a useful reminder that—both to avoid discrimination suits and to ensure a fair and equitable compensation system—associations should base compensation decisions on established, job-related criteria. They should be prepared to document the legitimate factors used to set compensation, including the responsibilities of the job, the applicant’s qualifications and experience, budgetary considerations, and market benchmarking.