Employers commonly request salary histories from job applicants as part of the hiring process, but this practice will soon become illegal in Massachusetts.
In an effort to combat pay discrimination, the state recently enacted legislation restricting salary history requests. Effective July 1, 2018, employers will have to make an offer of employment, including the compensation level for the job, without first requesting an applicant’s salary history or confirming wage or salary information that the applicant has voluntarily disclosed.
The law is the first of its kind in the U.S. but probably won’t be the last. In New York City, a measure proposed before the city council contains a salary history restriction that closely resembles the one in Massachusetts. And under an amendment to California’s equal pay law, which was approved by the legislature and awaits the governor’s signature, employers would no longer be able to justify a disparity in pay based on salary history alone.
It’s easy to see why employers would ask applicants to supply past compensation information as part of the hiring process. Salary histories are useful in giving employers an idea of the pay level applicants are likely to accept and what they’re worth on the market.
Everyone weighs quality and cost when making buying decisions, and the process of selecting new employees can involve the same type of "comparison shopping." This is especially true for positions where employers have a lot of flexibility in setting pay.
Details on salary history can also be useful when filling positions where the starting salary’s rigid. For example, if a job pays a maximum of $50,000, but one of the applicants already makes $80,000, having that information up front could save both the employer and the applicant wasted time and effort.
So why ban such a useful tool?
To prevent the perpetuation of past disparities in pay. When it comes to the gender pay gap, pretty much everyone acknowledges its existence, even if they don’t agree on its exact size or all the factors contributing to it.
The fact is that salary history information can put a woman at a disadvantage if just one employer pays her less than her male counterparts. Once a disparity in compensation is introduced, it can reduce an employee’s compensation and earning power across her entire career.
An employer could certainly argue that it has no discriminatory intent if it uniformly requests salary histories, regardless of gender or race, and uses them as an indication of applicants’ market value. But that doesn’t prevent an employer from being sued for pay discrimination. Federal law (and many state laws) prohibit policies and practices that have a disparate impact based on gender, even in the absence of intentional bias.
Getting back to the issue of salary histories, an obvious question for employers would be how to make up for the lack of information about applicants’ prior compensation. One option is to change the request by asking applicants for their "salary requirements" in the new job. Remember the employee making $80,000 who was applying for a position paying $50,000 per year? A request for her salary requirements would quickly reveal the compensation mismatch.
Although some employers worry this might encourage applicants to inflate their salary requirements, it’s important to remember: the hiring decision is yours. If you can’t meet an applicant’s salary requirements or you think they’re unreasonable, don’t make an offer.
One thing that’s important to note about the Massachusetts law is that it doesn’t prohibit job seekers from choosing to disclose their salary histories. Applicants with high salary requirements can volunteer the information to make their case. Employers just can’t go back and confirm an employee’s salary history until after a job offer has been made.
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