California Joins the Trend of Banning Questions About Salary History in Bid to Close the Gender Pay Gap
On Thursday, October 12, 2017, California Governor Jerry Brown signed a landmark new law barring California employers from inquiring about applicants' previous salaries and benefits. The new law, which goes into effect on January 1, 2018, is designed to help narrow the gender pay gap by prohibiting an employer or the employer's agent from asking for and then relying upon the salary history information of a job applicant as a factor in determining whether to offer employment to an applicant or using it to set compensation.
Under the new law, which will add Section 432.3 to the California Labor Code, all California employers and their agents:
- Are prohibited from seeking salary history information about an applicant for employment
- Are required, upon reasonable request, to provide the pay scale for a position to an applicant for employment
- Nothing in the law prohibits an applicant from voluntarily and without prompting disclosing salary history information to a prospective employer
- If an applicant voluntarily and without prompting discloses salary history information to a prospective employer, nothing in the law prohibits that employer from considering or relying on that information in determining the salary for that applicant. (However, if an applicant does voluntarily disclose past salary history, an employer cannot rely on prior salary alone to justify any disparity in compensation.)
Similar laws have passed in Delaware, Oregon, Massachusetts, New York City, Philadelphia and San Francisco.
In 2016, California women who were full-time wage and salary workers had median weekly earnings of $814 or 88% of the $925 earnings of their male counterparts, the U.S. Bureau of Labor Statistics reported last month. Recently, the World Economic Forum reported that it would take 170 years to close the global gender pay gap.
There's no single global response to the gender pay gap in term of regulation and approach. The UK is trying an approach of using the court of public opinion to close the gap. New regulations introduced in April 2017 require mandatory public reporting of several different metrics, including the percentage difference in mean and median hourly pay between men and women for organizations in the UK with at least 250 employees. Covered employers must upload their data to a government website and face (potential) public shaming.
Until 2 months ago, the US was poised to similarly require gender pay reporting (though, not publicly like the UK regs) through the revised EEO-1 Form. In August, the federal Office of Management and Budget "stayed" the EEO-1 compensation data reporting requirement, pending further review.
Despite the absence of federal reporting obligations, California employers may soon find themselves subject to state reporting requirements. AB 1209, the Gender Pay Gap Transparency Act, passed the Senate and was approved by the California Assembly in September. AB 1209 would require employers with 500 or more employees in California to collect and submit data on wage differentials between male and female exempt employees. This report would be filed with the California Secretary of State and would be available to the public on the Secretary of State's website. While we would have expected the Governor to sign AB 1209 and AB 168 on the same day if he intended to pass AB 1209, we will continue to monitor the situation. More to come.
For now, with regard to the new salary history ban, we recommend that California employers prepare by:
- Removing all salary questions from any hiring forms (including job applications, candidate questionnaires and background check forms)
- Updating interviewing and negotiating policies and procedures
- Training recruiting, hiring managers and interviewers on the new law, to include instructions regarding the importance of ensuring that candidates are not pressured (even indirectly) to disclose salary history and how to respond to requests for pay scale information
Please reach out to your Baker McKenzie lawyer for more details.