States Begin to Reject Salary History Bans; Will Others Follow?

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By Genevieve Douglas

Michigan and Wisconsin are the first states to pass legislation prohibiting localities and jurisdictions from banning pay history inquiries. The moves go against the tide of salary history bans passed in cities and states across the country in an attempt to close gender and racial pay gaps.

The Michigan Chamber of Commerce, like groups in other states, supported the preemption legislation because employers seek “one law for all businesses to comply,” Wendy Block, senior director of health policy, human resources, and business advocacy at the Michigan Chamber, told Bloomberg Law in an email March 28.

Michigan Gov. Rick Snyder (R) on March 26 signed legislation that expands its 2015 local preemption law by specifying that local governments can’t restrict what employers can ask in the interview process beyond existing state and federal laws. Preemption laws bar municipalities and other jurisdictions from passing ordinances that would differ from state employment law, such as minimum wage, paid sick leave, background check requirements, or other workplace rules.

Lawmakers in Michigan aren’t alone in their legislative effort. Wisconsin lawmakers passed preemption legislation (A.B. 748) that specifically cites salary history among issues that local jurisdictions can’t enact or enforce through ordinances. It now awaits the signature of Gov. Scott Walker (R).

Other states have made similar attempts. Minnesota’s governor vetoed an employment law preemption bill last May, and preemption language in laws in Washington and Mississippi also were voted down.

Just Party Politics?

There is business support for alignment among state, local, and federal laws because it makes compliance much easier and gives human resources professionals one set of rules to play by, Melissa Murdock, director of external affairs at compensation and HR association WorldatWork, told Bloomberg Law in an email March 29. “This isn’t the trend in public policy, though, especially when it comes to employment law.”

Compliance with multiple jurisdictions is especially onerous for small-business owners, Eric Bott, state director for conservative advocacy group Americans for Prosperity Wisconsin, told Bloomberg Law April 2. “From an employer perspective, they cannot function with a patchwork quilt of regulations.”

According to Bott, legislation both for and against salary history bans likely will continue in states that have conservative governors or legislatures at the state level and liberal mayors or councils at the local level.

“Philosophically, some more conservative states and voters may object to government interference in the hiring process and, therefore, oppose more liberal localities or cities prohibiting employers from asking candidates about their salary history,” Murdock said. “However, I don’t think this is an issue that is easily categorized as a conservative or liberal issue, which in turn makes it more complicated to predict how states will address it.”

Bans Across the U.S

To date, California, Delaware, Iowa, Massachusetts, Oregon, Tennessee, Washington, Puerto Rico, New York City, and Philadelphia have passed laws barring employers from inquiring about salary history.

The intention of salary history bans is to close the national wage gap for women and minorities. Women working full time in 2016 typically were paid just 80 percent of what men were paid, according to research from the American Association of University Women.

“If you start out behind in pay, and future salaries are based on previous salaries that have nothing to do with your new job, it compounds over a lifetime,” Kate Nielson, state policy manager for the AAUW, told Bloomberg Law March 30. “It affects current salaries, future salaries, and retirement.”

Employers should strive to avoid basing pay solely on salary history for their own benefit as well, Nielson said. “There are a lot of employers trying to pay workers equally, and if they are relying on past salary they may be introducing discrimination into their pay practices.”

Employers Responding

Regardless of state or local law, large employers like Amazon, Bank of America, Wells Fargo, and Progressive have eliminated salary history questions from the hiring process, and other employers are following suit.

A new survey from WorldatWork found that 37 percent of approximately 835 employers have implemented a policy to stop asking about a candidate’s salary history. The survey also shows that 40 percent of employers that haven’t adopted a salary history ban are likely to do so in the next 12 months.

“There continues to be growing concern for employers to ensure their pay practices don’t discriminate based on gender. I don’t see this going away anytime soon,” Murdock said. “Employers, for the most part, want to show their employees, the public, their shareholders, and their competitors that they value diversity and pay people fairly. Because of this, I don’t see a huge political demand building from the business community for government to step in at the state level and start overriding local laws on this issue.”

To contact the reporter on this story: Genevieve Douglas in Washington at gdouglas@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com

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