Starting January 1, 2018, employers will be prohibited from (1) asking applicants about prior salaries, (2) using salary histories as a factor in determining whether to hire applicants, and (3) considering salary histories in determining how much to pay applicants (unless the history was obtained from public information or voluntarily disclosed by the applicant). Employers will also be required to supply applicants the salary scales applicable to the positions sought, upon reasonable request.
The new rule is a dramatic change to the status quo, which has been the status quo only since January 1, 2017, when the California legislature amended the California Equal Pay Act to prohibit employers from justifying an otherwise unlawful difference in pay based on an employee's or applicant's prior salary alone.
So is salary history an absolutely forbidden topic at the interview table? No. The new law, which will be codified as California Labor Code Section 432.3, does not prevent employees from voluntarily offering their prior salary information. Therefore, if an applicant voluntarily offers his or her prior wage information—without having first been prompted by the employer—the employer can use that information in determining the applicant's salary, but not as a factor in determining whether to hire the applicant. Employers are also free to make decisions based on information that is publicly available to them pursuant to federal or state law. (The new law does not apply to non-employee applicants, like independent contractors.)
Proponents of the new law say that it is needed to help address the pay disparity between men and woman in California workplaces—in other words, that it is needed to help "de-institutionalize" pay discrimination. Opponents of the new law believe that it is another example of Sacramento's overreach that will only add another "technical" violation to those in the 800+ page Labor Code. They also contend that the law will have little effect other than to supply litigious, disgruntled, or otherwise unhappy job applicants with an easy road to the courthouse if an employer makes the mistake (innocent or otherwise) of asking about prior salary.
Practical Effects / Fast Facts / TL;DR
In addition to seeking the advice of trusted legal counsel, employers should consider taking the following steps, prior to January 1, 2018, to reduce the risk of being one of the first to be hit with a Section 432.3 lawsuit:
- Call Your Recruiters and instruct them not to solicit salary information from prospective hires. Recruiters/headhunters/talent scouts will be considered "agents" under the new rule. Prudent employers will put instructions to their recruiter(s) in writing as well.
- Update Job Applications to remove any requests for an applicant's prior compensation or salary history.
- Meet with HR and Hiring Managers to ensure they understand the requirements of the new rule. Document these instructions in writing.
- Tread Lightly in salary negotiations. Although it may be permissible to discuss salary expectations with applicants and/or their understanding of the market rate for particular positions, employers cannot "prompt" an applicant to disclose his/her salary history.
- Recognize That Corporate Restructuring can turn current employees into "applicants."
- Determine the Applicability of Local Laws, which may impose stricter requirements on the information employers may seek from applicants. For example, San Francisco's "Parity in Pay Ordinance," which takes effect on July 1, 2018, imposes arguably stricter requirements on San Francisco employers.