From Where We Sit

The Salary Privacy Bill and the Inevitable Impact on Hiring

It’s the 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 too expensive or out of range.

In California, the Salary Privacy Bill was enacted by Governor Jerry Brown on Thursday, October 12, 2017. The measure is part of a caucus-backed package of bills “paving the way for a better, more inclusive, healthier California,” said Brown. Under the new statute, which takes effect in January 2018, candidates can no longer be asked to provide their salary history. Applicants are free to volunteer information on prior pay and benefits and, if they do, employers may consider previous compensation in their offers. The law also requires employers to provide applicants, upon request, with a salary range for the jobs they seek.

“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 previous salaries. The salary history bans generally are part of, or addenda to, broader laws that prevent employers from underpaying women. More generally, compensation experts say the measures also address the fundamental unfairness of shackling a new employee to a prior salary. Experts suggest that the real agenda should be that of trying to understand the market rate for a specific role rather than pricing the person.

Many of you may be asking how we can determine whether or not a candidate’s current pay is at or above your salary range. It has been suggested that you post the salary range or clearly tell a candidate “this is what we hope to pay someone” in order to avoid wasting time and resources.  One other strategy I recommend would simply be to ask a candidate about their compensation expectations to get a sense early on whether or not you are in the ball park.  Finally, if a candidate volunteers their current compensation, you may use that detail to develop an offer, but I would use abundant caution around any attempts to try to secure someone “at a bargain,” as current legislation specifically guards against basing compensation solely on someone’s past salary.

To recap, what best practices can you implement to comply with the law? During the hiring process:

  • Focus questions on the candidate’s salary demands, skills, and qualifications.
  • Ensure that applications and other forms do not include questions about applicants’ salary history, even if such questions are framed as “voluntary.”
  • Modify written policies and educate interviewers and hiring staff to prohibit inquiries about applicants’ salary history.

It is clear that this will be complex and challenging for many of us going forward, but I trust it will soon become part of the new norm relative to equity and inclusion.

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