Recently several states and cities enacted laws prohibiting nonprofit organizations and other employers from asking about or considering an applicant's salary history when making hiring decisions. The trend began with Massachusetts in August 2016, followed by California, Oregon, Delaware, Philadelphia, San Francisco, New York City, and Puerto Rico—with similar legislation introduced in several other jurisdictions, including Illinois, Washington state, New Jersey, and Washington, DC. The New York City ordinance just went into effect October 31, 2017, and most of the others will take effect by the summer of 2018.
Generally, these laws forbid employers and their agents from (1) inquiring about or seeking information about a job applicant's prior salary or other compensation history, (2) relying on salary history as a factor in determining whether to hire an applicant, and (3) considering salary history in determining what salary to offer an applicant. Most of these laws define "salary history" broadly to include past commissions, bonuses, wage supplements, and even fringe benefits. Some contain additional requirements. For example, upon reasonable request, California employers must also provide an applicant with the pay scale for the position sought. Employers who violate these laws will face administrative penalties for each violation, suits by applicants seeking damages, or some combination of the two.
Should your nonprofit's staff avoid discussing compensation during the interview process altogether? Not necessarily. Employers may generally discuss the applicant's compensation expectations for the position sought, as long as the discussion is focused on prospective and not prior salary. Many of these salary ban laws also contain exceptions for voluntarily disclosed and publicly available information including, for example, information available on a Form 990. If the applicant opens the door by voluntarily disclosing his or her salary history—without prompting by the employer—the employer may generally rely on that information in determining the applicant's salary. Employers are also typically free (except in New York City) to make decisions based on information that is publicly available to them pursuant to federal or state law. However, a nonprofit employer in these covered states may never use salary history information to either screen or evaluate applicants.
Proponents insist that these laws are necessary to address gender pay disparity and to combat pay discrimination. Opponents of such laws contend that salary history bans will have little effect, other than to encourage litigious, disgruntled, or otherwise unhappy job applicants to file complaints or bring suit should an employer make the mistake (innocent or otherwise) of asking about prior salary. Either way, prudent nonprofits should carefully monitor any salary history ban developments in their respective jurisdictions.
Practical Considerations
Here are some tips for nonprofit employers covered by a salary history ban:
- Call your recruiters and instruct them in writing not to consider or solicit salary history information from prospective hires. Recruiters, headhunters, talent scouts, and other, similar parties may be considered "agents" under the law, and nonprofit employers may be liable if these agents inquire about an applicant's salary.
- Update job applications to remove any requests for an applicant's prior compensation or salary history. A disclaimer stating that responding to the application's salary history questions is voluntary or instructing applicants from the affected jurisdictions not to answer is likely insufficient.
- Train HR and hiring managers to ensure they understand the requirements of the new rules. Instruct them to keep all discussion of salary during interviews (if any) focused on the applicant's expectations and needs rather than prior compensation. Document these instructions in writing.
- Tread lightly in salary negotiations. Although it may be permissible to discuss salary expectations with an applicant and/or their understanding of the market rate for particular positions, nonprofits cannot "prompt" an applicant to disclose his or her salary history.
- Recognize that corporate restructuring may turn current employees into "applicants" under some of the salary history ban laws.
- Determine the applicability of local laws, which may impose stricter requirements on the information your organization may seek from applicants. For example, San Francisco's "Parity in Pay Ordinance" imposes arguably stricter requirements on San Francisco employers than California's statewide ban.
- Consider the interplay with other laws, such as pay equity and discrimination laws. For example, Maryland's Equal Pay for Equal Work Act prohibits an employer from paying an employee a wage different from that paid to a co-worker of another gender working in the same establishment and county, if the two employees perform work of comparable character.
- Seek the advice of your employment lawyer to ensure that your organization is in compliance with the law.