Is It Illegal to Ask for Salary History from Job Candidates?

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It might be.

The state of California just joined a handful of other states in making it illegal for employers to ask job applicants about their prior salaries. AB 168, also known as the Salary Privacy bill, was signed by Governor Jerry Brown on Thursday, October 12th but it doesn’t go into effect until  January 1, 2018.

While there are only a few states with such a law, there are many more locales with some type of ban. For example, starting October 31, 2017, employers in New York City are prohibited from asking about, relying on, or verifying a job applicant’s salary history during the hiring process.

What's behind these salary history bans?

The goal behind these bans is mostly to attempt to improve pay equity for employees. US Census Bureau Data from 2016 reports that women make 80.5 cents for every dollar a man earns, but the data is more complicated than that when race is considered.

The Pew Research Center came up with an analysis that shows that compared to white men with comparable education, skills, and experience, Hispanic women earn 58 cents to the dollar, black women earn 65 cents, white women earn 82 cents, and Asian women earn 87 cents.

Because the pay disparity is still so wide more than 50 years after the Equal Pay Act was signed by John F Kennedy, many people believe more needs to be done – and they see these new salary history bans as one way to close the gap.

Why do some people think this will work?

The rationale behind the idea is that employers use an applicant’s salary history to base their offer on. There is some truth to this concept, as HR professionals do like to know about the candidate’s salary history. They want to know if the base salary they offer is enough to make the candidate want to move. And if they know the history, they can also try to keep that base salary high enough for the candidate to want it but low enough to come under budget for the position.

Of course, if women are being paid less at their previous job and their new salary is based on that compensation, the pay disparity will likely stay the same at the new job. Which is exactly why these laws are being enacted.

But not everyone thinks they will succeed.

A survey conducted by PayScale found that women who were asked about their salary history and did not disclose were offered less than women who were asked and did disclose. (Interesting note: the men who did not disclose received higher offers than those that did.)

So this survey seems to show that disclosing salary history might actually be in a candidate’s favor.

Of course, the results may be different if the question hadn’t been asked at all. That’s what all these states and locales are counting on.

So what does all this mean for employers facing a salary history ban?

Since the laws are different in each locale, you should confirm with your HR department or legal team how your company is affected. But the general idea is this:

No more asking for salary history. Period.

If a candidate voluntarily brings it up, then it’s fair game. Otherwise, you’re going to have to figure out another way to determine the salary for the open position.

In a Rework article, Lynda Spiegel shared a pretty simple formula for that. “How much is this candidate worth to your organization overall, and how much is your organization worth to them? If a candidate is worth $X to your organization, $X is within budget and $X is within their budget, then that's what your offer should be.”

Maybe that’s the type of formula these lawmakers were hoping for.