Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Job applicants at Amazon’s second headquarters won’t be asked to divulge their salary history during the application process, as the Seattle-based tech giant recently decided to ban the inquiries.
And in three of the 20 potential future homes for Amazon’s HQ2, it would be illegal to ask anyway.
Recent decisions by Amazon and Bank of America Corp. to ban pay history questions on job applications follow a trend set by several states and cities that banned the pay history question in an effort to promote pay equity between men and women.
The intent of the local laws and employer policies is to reduce the impact of historical pay discrimination on women and minorities. If a person’s future pay is always to be determined at least in part by what she was paid in the past, the thinking goes, she will never catch up from having been underpaid to begin with.
National figures show that women make about 80 cents per every dollar earned by men.
Amazon and Bank of America report that their wage gaps aren’t nearly as wide.
Female employees at Amazon earn 99.7 cents for every dollar that men earn doing the same job, a company spokesperson told Bloomberg Law. The company found the same ratio exists between minority and non-minority employees.
Bank of America told Bloomberg News Jan. 25 it would restrict how it asks prospective employees about compensation history after finding women and minorities at the company make 99 percent of what men and non-minorities make.
“It’s fairly simple. We did it to be fair to all of our employees,” a Bank of America spokesperson told Bloomberg Law.
Amazon and Bank of America decided to ban the application question proactively, before any law affected their headquarters in Seattle and Charlotte, N.C., respectively.
Banning the salary history question can be accomplished in two ways, employment attorney Cynthia Jackson, a partner at Dentons in Silicon Valley, told Bloomberg Law. Employers are either changing the job application to comply with local laws and regulations on state-by-state or city-by-city basis, or they’re eliminating the question entirely before an offer is made, Jackson, who educates employers about pay history inquiry bans, said.
“There’s quite a bit of discussion among my clients that are taking this issue all the way up to the board room,” she said.
A motivator for employers choosing the second option is that they don’t want to take the risk of administering the wrong application in the wrong area and accidentally breaking the law, Jackson said.
Other companies have stopped asking the salary history question in the U.S. after their home state or city banned the question first.
Google LLC, Facebook Inc., and Cisco Systems Inc., all headquartered in California, stopped asking for applicants’ salary history at their offices nationwide. California’s statewide pay inquiry ban went into effect Jan. 1.
Likewise, New York City-based American Express Co. told Bloomberg Law in an email it hasn’t asked for salary history during the “sourcing, application and interview process” since October 2017. New York City’s salary history ban took effect at the end of that same month.
Wells Fargo & Co., which is based in San Francisco, also stopped administering a salary history application question when New York City’s law took effect. California and San Francisco both had bans pending when Wells Fargo made its decision.
California, Oregon, Massachusetts, Delaware, New York City, San Francisco, and Puerto Rico have all enacted laws banning employers from inquiring about an applicant’s salary history.
Philadelphia also enacted a pay history ban, but its law was placed on hold while it faces a challenge in court. An oral argument in the case is set for Feb. 2.
Other localities like New Orleans, Pittsburgh, New York state, and most recently New Jersey have banned the question for state employers.
While the laws are meant to not perpetuate past inequities, critics of have argued that this could be harmful for women and minorities who already make a fair wage and could use their salary history to their advantage.
Oregon, California, New York City, Delaware, and Puerto Rico’s laws have taken effect. The penalty provisions for Oregon and Puerto Rico’s laws, however, didn’t take effect immediately.
Pay equity laws will have an impact on the way companies recruit prospective employees and handle the hiring process.
Companies have historically used salary history as a crutch, Tom McMullen, a senior client partner at Korn Ferry Institute in Chicago, told Bloomberg Law. Salary history bans are “going to cause companies to have more robust structures for market pricing and job evaluation,” McMullen said.
In a survey of about 120 human resources executives, McMullen said, Korn Ferry found 58 percent aren’t sure how salary history bans would impact their business effectiveness. He said this is likely because many companies are already complying with regulations or taking a proactive approach.
About 28 percent said the bans would have a positive effect, and 14 said it will negatively affect their business.
Negative impacts are typically related to administrative burdens, McMullen said.
More cities, states, and businesses will likely ban pay history inquiries over the next few years, Andrea Johnson, senior council for state policy at the National Women’s Law Center, told Bloomberg Law.
Maryland, Mississippi, Rhode Island, New Hampshire, and Florida are all considering such legislation, Johnson said.
Maryland, which Johnson said has been a leader in equal pay, has a hearing for its salary history ban bill coming up in February. She said she’s hopeful the legislation that passed in the state House in 2017 will be enacted.
Seeing companies get rid of the past pay question either in response to laws being enacted, or proactively, has “proved that this is something employers could easily do away with,” Johnson said.
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