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Salary-History Bans Expanding

Philadelphia and Pittsburgh just became the latest cities to ban employers from asking job applicants about their salary histories. Experts weigh in on the impact of such bans on employers and pay equality.

Thursday, March 9, 2017
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The Keystone state is now a hotbed of pay equality. But just how far will the fair-pay fire spread?

After Pittsburgh and Philadelphia each passed a ban prohibiting employers from asking job applicants their salary histories earlier this year, the commonwealth is now among a growing list of municipalities working to address the issue of gender-pay inequality through legislation.

Currently, Massachusetts and New York are the only states with laws on their books prohibiting the practice of asking applicants for their salary histories, while four other states (Washington, New Jersey, Virginia and California) have recently taken up discussion of legislation on the topic. On a city level, New York and New Orleans have enacted similar bans to the ones passed by the pair of Pennsylvania cities, and Washington, recently considered legislation as well.

The issue of pay discrimination directly affects nearly half the workforce -- the Department of Labor estimates women account for 47 percent of American workers. In 2015, female full-time, year-round workers made only 80 cents for every dollar earned by men, a gender-wage gap of 20 percent, according to the Institute for Women's Policy Research. Women, on average, earn less than men in nearly every single occupation for which there is sufficient earnings data for both men and women to calculate an earnings ratio.

The ban's proponents say pay inequality starts when women and minorities are given lower starting salaries upon entering the workforce, which is then compounded when they are forced to state their salary histories when applying for a new job.

http://magdata.lrp.com/MAGDATA/servlet/DataServlet?fname=ThinkstockPhotos-488090934equalpayUSEL.jpgIn addition to raising women's wages, ending the persistent pay inequality can have positive economic consequences, the institute notes. According to a recent regression analysis of federal data by IWPR, equal pay would add $482 billion to the national economy.

Employers have come out swinging against the bans, including Comcast, the Philadelphia-based communications giant. The company voiced its concerns to Philadelphia City Council members back in January, saying the salary-history ban would violate employers' First Amendment rights to ask about wage history. Miguel Estrada, an attorney speaking on behalf of Comcast, said that to justify such a restriction, the city must prove it would advance its goal of reducing wage discrimination without restricting more speech than necessary, according to Philly.com.

That burden, he was quoted as saying, hasn't been met. In fact, he argues there is no evidence that asking for salary history perpetuates wage discrimination. Disparities could be due to legitimate factors, including "taking a 10-year absence from the workforce to 'see the world,' working fewer hours, or -- to state the obvious  -- being a worse employee,' " he said.

For companies affected by the bans, their HR leaders would need to quickly retrain their hiring staff and make sure their handbooks were updated as well to reflect the ban on asking salary questions during the interview process, says Benjamin Mann, an attorney at Fisher Phillips in Philadelphia.

"The ban also creates a challenge for multi-location employers that operate in cities or states with these bans, but that also operate in cities or states without such bans," he says. "Those employers now have two sets of rules to follow." 

It may even affect employers' compensation practices in a way that actually hurts, not helps, the prospective employee, he says. "For instance, without having past wage information, an employer is forced to guess, and may guess on the low end, which could result in a salary offer that is less than what the employer would have offered if it had the past salary information."

Even if their company isn't affected by a salary-history-question ban, HR leaders should take note of this new trend and start planning for compliance now, says Dan Stern, a member at Dykema's labor and employment practice in San Antonio, Texas.

"In fact," he says, "employers should consider complying voluntarily, or, at minimum, they should have a plan in place to respond to newly enacted bans on wage-history inquiries." 

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Furthermore, Stern adds, HR leaders should develop new methods of setting wage levels as they can no longer rely on compensation data derived from the hiring process.  "Employers will likely turn to the use of wage surveys to assist in making compensation decisions within job titles, groups and/or categories."

And while it may be frustrating for employers to navigate the increasing regulation on their business, the bans aren't likely to hurt them, says Aimee Delaney, a partner at Hinshaw & Culbertson in Chicago.

"What these bans will likely do is force employers to proactively research the marketplace and the current competitive values of their positions," she says. "It will also force employers to analyze what the true value of the position is to their operation and base compensation on these types of factors rather than on what the candidate made at their last employer."

Though Illinois does not have a salary-history ban in place, Delaney says, she polled some of her clients to get a sense of their reaction to one and how it may impact their practices. 

"Several of the HR professionals I spoke with had no problem with the ban," she says, "having already concluded that past salary is not an appropriate measure of what a candidate should be paid at their companies and/or the value of the position they are filling."

Employers may even see a boost in their own fortunes as a result of salary-history bans, says Mann.

"It helps employers in the sense that it may make employees happier, which translates to a more productive workforce," he says. "It also forces employers to base their wage and salary offers on experience, education, etc. -- and not on past salary -- which may help to create uniformity in their practices."

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