Google Case Puts Salary History Under Microscope

From labor disputes cases to labor and employment publications, for your research, you’ll find solutions on Bloomberg Law®. Protect your clients by developing strategies based on Litigation...

By Chris Opfer

Google Inc. isn’t the only company that uses workers’ salary histories to help set compensation rates. However, the tech giant’s recent acknowledgment of that practice comes amid a rising debate over whether employers should be able to ask job applicants how much money they’re making.

Two Labor Department investigators testified before a DOL administrative law judge April 7 that Google officials said during an on-site inquiry that the company asks new hires about their most recent salaries and tries to beat those figures by as much as 20 percent. Although Google Compensation Director Frank Wagner largely denied those statements during his own testimony the same day, a company spokesman later told Bloomberg BNA that salary history is one piece of the puzzle for setting pay rates.

“While we do consider previous salary as a data point, we’re pretty steadfast on basing the salary on the role itself,” Google spokesman Ty Sheppard told Bloomberg BNA April 12.

Advocates are concerned salary inquiries generally could cement previous pay discrimination by trapping women in a cycle of salaries lower than those of male colleagues doing the same jobs. DOL officials call that predicament “anchoring bias.”

“I think it creates a potentially risky scenario for employers,” Marc Mandelman, who represents businesses as a lawyer at Epstein Becker Green in New York and is not involved in the case, told Bloomberg BNA. “Historical disparities may be perpetuated by reliance on historical earnings.”

It could soon be illegal for employers in San Francisco to ask job applicants about their salary histories. Lawmakers there are expected to vote on a measure to ban the practice as soon as next month. Massachusetts and California already have state laws banning or limiting the use of salary histories, and similar legislation is pending in New York City and Philadelphia.

‘Systemic Disparities’

Google is currently embroiled in a spat with the Labor Department over how much information the company has to turn over as part of a random audit of federal contractors. The DOL wants a snapshot of worker pay and other information for 2014, as well as salary histories dating back to the company’s founding in some instances and contact information for Google’s some 20,000 workers.

DOL Regional Director Janette Wipper told the administrative law judge April 7 that the department has already uncovered “systemic compensation disparities against women pretty much across the entire workforce” at the company’s Mountain View, Calif., headquarters. The department has not unveiled the evidence supporting this claim. Bloomberg BNA obtained a transcript of the testimony before the judge—including that by Wipper, the two DOL investigators and Wagner—on April 18.

Google has repeatedly denied any pay disparity among men and women doing the same jobs for the company, saying that it conducts a rigorous annual analysis to ensure pay equity. Sheppard also pointed Bloomberg BNA to an April 11 Glassdoor analysis, in which the workplace information compiler said salary information shared by current and former Google workers showed no statistically significant disparity.

Wipper said the department wants the additional information to help determine the source of the disparity.

Getting ‘on Par’

Federal discrimination laws allow an employer to ask about an applicant’s previous pay rate during the job interview process. What’s less clear is whether an employer that bases compensation on salary history can use that as a defense if it’s later sued for pay bias.

“Companies can use wage history as a touch point in determining a salary offer in legitimate and non-discriminatory ways,” Christine Hendrickson, a Seyfarth Shaw attorney who represents businesses in pay bias cases, told Bloomberg BNA. “For example, knowing a job seeker’s current salary can help crystallize some important information about the market for the role, the applicant’s skills, experience and performance in prior jobs, and provide information about the job seeker’s potential motivation to make a job leap.”

The Equal Pay Act and the Civil Rights Act of 1964 give workers the power to successfully sue for pay bias by establishing a disparity in compensation among workers doing the same job, even if it’s not intentional. An employer can often avoid liability, however, by proving that the disparity is based on legitimate reasons other than the worker’s sex.

The Labor Department enforces Executive Order 11,246, which bars employment discrimination by federal contractors.

The Supreme Court in 1974 ruled that a glass manufacturer couldn’t pay male inspectors more than their female counterparts simply because women were allegedly more willing to take less pay for the job. The U.S. Court of Appeals for the Eleventh Circuit some 14 years later rejected General Motors’ argument that it was shielded from pay discrimination claims because it based compensation on workers’ prior pay rates.

Still, the often employee-friendly Ninth Circuit has made clear that federal pay discrimination law doesn’t bar employers from asking about prior salaries. That’s why some cities and states have written such a ban into their own bias laws.

“I think we’re seeing some interest in addressing this through new legislation to try to level the playing field,” Pamela Coukos, a former Obama administration Labor Department program manager, told Bloomberg BNA. Coukos is a founder of Working IDEAL, which advises employers on how to develop a diverse recruitment pool.

“That initial salary-setting decision can be a very significant determinant for women’s ability to get and stay on par with their male colleagues,” Coukos said. “That is a really good place in my opinion to have an intervention. That first decision drives so many other decisions.”

First Amendment Beef

Massachusetts was the first state to ban employers from asking about job applicants’ salary histories. California Gov. Jerry Brown (D) vetoed legislation that would impose a similar ban in the Golden State, but state law makes clear that salary history isn’t a defense to pay discrimination claims.

The Philadelphia Chamber of Commerce is suing to block a salary history ban in that city, and an ordinance expected to be signed into law in New York City may face a similar legal challenge. The business group says the Philadelphia law violates employers’ free speech rights.

A proposed San Francisco ordinance to prohibit employers from taking prior salaries into account for compensation purposes could get a vote in May, according to its sponsor.

Litigation Ongoing

Google dodged a bullet, at least temporarily, when the Labor Department ALJ declined the agency’s request for summary judgment and an order forcing the company to turn over the additional pay information for its headquarters workers.

The judge—in what some observers have said is a nonbinding portion of the decision—also expressed skepticism about whether the department is entitled to most of the outstanding information. Google’s Sheppard told Bloomberg BNA around the time the lawsuit was filed that the company had already turned over “hundreds of thousands of records” to the Office of Federal Contract Compliance Programs as part of the audit.

The DOL hasn’t officially accused Google of pay discrimination. Google’s Wagner in his testimony said the company largely uses market data to set starting pay levels and might only consider salary history if an applicant was making more than the set rate for a particular position.

Advocates on both sides of the labor and employment bar stressed that any evidence showing that Google relies on salary history isn’t by itself enough to prove discrimination. Still, several observers said the company may want to reconsider how it determines pay rates.

“I think laws like the ones in New York and Philadelphia may at the end of the day create a good practice for employers to follow,” Epstein Becker’s Mandelman said. “One has to ask the question: What is the relevance of someone’s salary in a different job at a different employer and under different circumstances to the salary that a company is willing to pay for a particular position?”

To contact the reporter on this story: Chris Opfer in New York at copfer@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Christopher Opfer at copfer@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Labor & Employment on Bloomberg Law