NEW LAWS BAN THE SALARY QUESTION
States and cities say measures needed to close the pay gap between men and women, but some companies complain it hinders hiring and hurts business
It’s that job interview question you’d love to dodge: What’s your current, or most recent, salary?
A low figure could limit your starting pay. A high number might make you seem expensive.
Now, several states and cities are banning the question as part of efforts to ensure pay equity for women, but some companies say the new laws represent yet another intrusion into their businesses.
This week, the city of Philadelphia said it would hold off on enforcing the legislation until a federal judge rules on a petition to block it from the Chamber of Commerce for Greater Philadelphia. A federal court already had temporarily stayed the law, which was to take effect May 23. And Connecticut recently dropped the “salary history” prohibition from its bill to ensure gender pay equity.
Philadelphia joins New York City and Massachusetts, where legislation was passed last month and last year, respectively, in barring employers from asking job candidates about their salary history or benefits.
The laws are scheduled to take effect in New York this year and in Massachusetts in July 2018.
At least eight other states are considering similar measures — Illinois, Maine, Maryland, New Jersey, New York, Pennsylvania, Rhode Island and Vermont, according to law firm Fisher & Phillips. The bills are aimed at closing a long-standing gender-based pay gap that, according to the Census Bureau, has women earning about 80 cents for every dollar earned by men. (Studies that compare men and women in similar occupations and control for other factors, such as experience, find much narrower disparities.) By basing future salaries on previous wages, employers can perpetuate the earnings divide, advocates for women say.
“We know that when employers see some past salary, they’re likely to take that into account” in setting the employee’s starting pay, says Emily Martin, general counsel for the National Women’s Law Center. As a result, “too often, when women are paid less than men, that pay disparity can follow them from job to job.” In fact, she says, the gender pay gap widens as women age, supporting the theory that employers are relying too heavily on salary history.
The new measures generally are part of, or addenda to, broader laws that prevent employers from underpaying women. The legislation in Massachusetts and some other areas also prohibit employers from instructing employees not to discuss their wages. Such conversation is often needed so a female worker can file a challenge. Generally, the laws allow firms to rely on salary information if the job candidate volunteers it.
More broadly, compensation experts say, the measures address the fundamental unfairness of shackling a new employee to a prior salary. “Our advice to organizations is that they should price the position, not price the person,” says Lydia Frank, vice president of Pay Scale, a compensation data and software firm. “You’re trying to fill a certain role. What you should be doing is understanding the market rate for that role.”
But Cheryl Behymer, a labor lawyer for Fisher & Phillips who represents employers, says many companies use salary history to set pay and manage their costs. “It’s hard to figure out how to pay somebody a fair amount,” she says. “You’re looking at getting the best employee you can, but … there’s nothing wrong with trying to save the company money.”
The prohibition against asking candidates for their prior salaries follows the passage of “ban the box” laws in nearly half the states barring employers from requiring job seekers to acknowledge on applications whether they have a criminal record.
“Here’s another point where the government is dictating to an employer how to conduct its business,” Behymer says.
Although both the Chamber of Commerce for Greater Philadelphia and Comcast, which is headquartered in the city, oppose the new law, neither would comment. But in a statement in January, chamber president Rob Wonderling said, “Tragically we are finding that when global enterprises are looking to locate their business in America, Philadelphia is quickly falling off the list.”
He said various new restraints are “having a negative impact on job growth.” The chamber also argues the salary-history law violates companies’ free speech rights, and there’s no evidence it promotes wage equity
Michael Aitken, vice president of government affairs for the Society for Human Resource Management, says a current or previous salary can indicate whether a job candidate’s pay is above the employer’s range, avoiding wasted time and resources. But he says companies can address that by including a salary range in a job posting or by telling a job candidate early on.
And while a salary history provides some companies a better understanding of pay for comparable positions, Aitken says, many companies conduct their own market surveys anyway. But for small businesses that can’t afford such surveys, the new laws pose a more formidable hurdle, he says.
Aitken acknowledges that some employers use a salary history as a baseline to determine future pay, but he says that’s typically within the salary range it already has established for the position. Businesses that underpay employees are at risk of losing them to competitors, he says.
Meanwhile, as long as the salary history question is still fair game, job candidates inclined to distort their pay should beware: Current or former employers aren’t required to reveal your former salary if asked by a recruiter, though they can if they wish.
Spen Difference, which provides procurement and other services to restaurant chains, asked job candidates for their salary history to help set starting pay until it brought on Pay Scale as a consultant a year ago, says Carla Williams, vice president of human resources. Now, it has access to a trove of market data.
“Getting an employee at a bargain (didn’t) feel great for us,” she says, adding pay disparities can hurt morale, prod employees to leave and open the company to charges of gender discrimination.
Now, Williams says, the company annually provides its 40 employees market-based salaries for jobs similar to their own, noting that many mistakenly believe they’re underpaid, so the information is no longer “that elephant in the room.”
“Too often, when women are paid less than men, that pay disparity can follow them from job to job.” Emily Martin, National Women’s Law Center