What Employers Need to Know about San Francisco’s Salary History Ordinance

San Francisco’s “Parity in Pay Ordinance,” prohibiting employers from inquiring about a job applicant’s salary history, took effect on July 1, 2018. This post discussed significant provisions of the ordinance as well as key considerations for employers to ensure compliance with the new regulation.

The San Francisco measure follows several states’ and cities’ enactment of similar regulations designed to address wage disparities. See Considerations for Employers in Massachusetts, Countdown to New Jersey’s Diane B. Allen Equal Pay Act, and Connecticut Bans Inquiries into Applicants’ Wage and Salary History. Following the passage of San Francisco’s Parity in Pay Ordinance, California’s Equal Pay Act (EPA) was amended in 2017 to prohibit employers from asking job applicants about salary history.  The California salary history prohibition largely mirrors the San Francisco ordinance with some differences, as noted below.

What employers are affected?

  • Employers who conduct business in San Francisco are governed by the ordinance.

What types of inquiries are prohibited?

  • Employers may not inquire about or consider the current or prior salary history of a job applicant in determining whether to hire the applicant or the salary to offer them.

What if an applicant volunteers his or her salary history information?

  • The bar applies even if an applicant voluntarily discloses his or her prior salary history. Employers are prohibited from using the information, regardless of whether it is voluntarily disclosed, when making hiring or promotion decisions.

What if I am asked by another employer to share a former employee’s salary information?

  • Under the ordinance, employers are prohibited from disclosing a current or former employee’s salary history without authorization from the employee, unless the salary history is publicly available or the disclosure is required by law. Employers should exercise caution when responding to salary history inquiries to ensure compliance with this prohibition. Employers may conduct background checks that may disclose salary information, but are prohibited from using such information in considering the applicant for the position.

As an employer, am I required to notify employees of this change in the law?

  • Employers are required to post notice of the ordinance at the job or on the worksite.

What happens if I am accused of violating the ordinance?

  • Employers have a one-year grace period – until July 2019 – in which they will be issued a warning and notice to correct any suspected violations. Employers may also appeal Office of Labor Standards Enforcement (OLSE) determinations to a hearing officer.

Can I discuss salary expectations with potential applicants?

  • Notably, the San Francisco ordinance differs from California’s Equal Pay Act in that it specifically states that employers may engage in discussions with applicants about salary expectations, as long as all other provisions of the ordinance are followed. California’s EPA, similar to the ordinance in most other regards, is silent on this issue.

What should I do now?

Employers should stay up to date on pay equity developments and regularly revisit and revise their hiring practices and policies to ensure compliance with the law. Consider retraining all employees involved in the hiring process on the provisions of the law. Consult with a member of Jackson Lewis’ Pay Equity Group for assistance with evaluating and revising your policies.

Hawaii on Board with Pay Transparency and Salary History Ban

Hawaii will be joining the salary history ban trend beginning in 2019. On July 5, Governor David Ige signed into law a bill seeking to address the pay disparity between men and women who perform similar work.

Effective January 1, 2019, Hawaii employers with at least one employee in the state may not ask a job applicant about his or her salary history or rely on the applicant’s salary history in determining salary, benefits, or other compensation during the hiring process or negotiation of an employment contract. Employers also may not bar employees from disclosing their wages or discussing or inquiring about the wages of other employees.

The new law expressly permits certain inquiries. An employer may discuss compensation and benefit expectations with the job applicant and inform the applicant of the proposed or anticipated salary or salary range for the position. The law also provides that “any objective measure of the applicant’s productivity, such as revenue, sales or other production reports” may be discussed with the applicant.

If an applicant “voluntarily and without prompting” discloses salary history information, the employer may consider salary history in determining the applicant’s salary and benefits and may verify the salary history. But employers using such “voluntarily” disclosed salary history information to set compensation must exercise caution because of the risk of litigation over whether the job applicant made a truly voluntary disclosure.

The administrative processes and remedies afforded individuals under Chapter 378 on unlawful discriminatory practices will apply to the salary history ban.

To ensure compliance with the law’s requirements, employers should consider the following best practices:

  1. Remove salary history questions from application forms, interview questions and hiring documents.
  2. Train managers not to ask about an applicant’s pay history during the pre-employment process – when they are screening or interviewing applicants.
  3. Don’t ask for or provide salary history information during reference checks; included in this restriction is other third parties, such as staffing agencies, acting on behalf of the employer.
  4. Remove any prohibitions about salary discussions by employees from written policies.

In addition, for employers who operate in multiple jurisdictions, consider having a uniform practice across all jurisdictions by removing salary history questions during the pre-hire process.

Finally, to help set salaries that are appropriate for the market, consider using salary bands and external resources to research the market value of the position for which you are hiring, and conduct regular audits of your pay practices to ensure internal and external pay equity.

Please contact Jackson Lewis for compliance and other assistance.

Considerations for Employers in Massachusetts

Like New Jersey’s Diane B. Allen Equal Pay Act, the Massachusetts Equal Pay Act (MEPA) amendments went into effect on July 1, 2018. Regarded as one of the first comprehensive fair pay laws to be passed at the state level, MEPA has served as not only as a catalyst, but a model, for the patchwork of fair pay laws being enacted across the nation.

Outlined below are some of the law’s main components and best practices employers can implement to comply and mitigate risk.

Comparable Work

MEPA requires equal pay for “comparable work.” Under MEPA, “comparable work” is defined as work that “requires substantially similar skill, effort, and responsibility.” This expands the pool of comparators for equal pay claims beyond those in the same job title or function.

  • Tip: Consider which jobs may be “comparable,” despite not being the same. The Attorney General Guidance notes that comparable jobs can span functional areas or business units. Think broadly!

Permissible Differences in Pay

MEPA significantly limits defenses employers can use to justify differences in pay for comparable work. Under MEPA, differences can be explained only by:

  1. A seniority system;
  2. A merit system;
  3. A system measuring earnings by quantity or quality of production;
  4. Geographic location;
  5. Education, training or experience; and
  6. Travel that is a regular and necessary part of the job.
  • Tip: Be ready to prove a valid reason for pay differences. Noticeably absent from the list above is salary history – salary history cannot be used to justify any difference in compensation. Any differences should fall within one of the six buckets above. Train your hiring managers and HR staff accordingly.

Salary History

Employers cannot seek salary history information from a prospective employee unless it is to confirm wage or salary information that has been shared voluntarily by the employee or after an offer of employment has been made.

  • Tip: Plain and simple – do not ask about salary history. Ensure that the question is removed from applications and interview question templates. Communicate this new rule to all managers involved in the hiring process.

Self-Evaluation Defense

Under MEPA, employers can establish an affirmative defense against liability if they conduct a reasonable and good faith self-evaluation of their pay practices. This evaluation must be within the previous three years before an employee files an action and employers must be able to show reasonable progress toward eliminating discriminatory wage differentials.

  • Tip: Consult with counsel and consider conducting a privileged pay analysis to mitigate risk should an employee bring a claim. Also ensure that organizational leaders are on board to make pay adjustments, if determined necessary.

Please contact Jackson Lewis with any questions about MEPA.

Countdown to New Jersey’s Diane B. Allen Equal Pay Act

On July 1, 2018, only ten days from now, the Diane B. Allen Equal Pay Act (Act) goes into effect, broadening New Jersey’s Law Against Discrimination (LAD) to promote equal pay for all employees covered under the law.

The Act, considered one of the most comprehensive and pro-employee equal pay laws in the nation, significantly expands equal pay protections under the LAD and even beyond the federal Equal Pay Act. Under the Act:

  • Pay discrimination prohibitions are not limited to sex but extend to all classes protected by the LAD, i.e., race, creed, color, national origin ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, atypical hereditary cellular or blood trait, pregnancy/breastfeeding, sex, gender identity or expression, disability, or service in the armed forces;
  • Anti-retaliation (“pay transparency”) protections are extended to employees who discuss or disclose information about pay and benefits;
  • Employers may be subject to more severe monetary penalties for violations; and
  • Employees have a longer period of time in which to bring a pay discrimination claim.

For details of the Act, see our article, Double Take: New Jersey Governor Poised to Enact Equal Pay Act.

WHAT SHOULD EMPLOYERS DO BEFORE JULY 1?

Employers that have not already done so should begin to take proactive steps to ensure compliance with the Act and mitigate potential risk.

Review Handbooks/Policies and Revise as Necessary

Employers should review handbooks, policies, employment contracts, and any other personnel documents and remove any terms prohibiting employees from requesting, discussing or disclosing compensation, benefits, and other protected equal pay information, such as job title and occupational category.

Notify and Provide Training to Managers and Recruiters

Employers should ensure managers and recruiters, including third-party recruitment sources, are aware of the Act and company pay transparency policies.

Begin Reviewing Hiring and Compensation Policies

To be able to defend and explain pay and differences in pay, an employer needs to understand how compensation is set. Employers should begin to review hiring and pay policies and practices to ensure employees are receiving equal pay for substantially similar work.

Begin Reviewing Jobs and Job Descriptions

Employers also should begin to review job titles, job responsibilities, and job descriptions to identify which roles may be considered “substantially similar” for pay purposes under the Act.

Consider Conducting a Privileged Pay Equity Analysis

Employers should begin to consider whether to conduct a privileged, proactive pay equity analysis to identify and resolve potential issues before a claim arises.

Jackson Lewis attorneys are available to assist employers as they navigate the Diane B. Allen Equal Pay Act.

Constitutionality of Philadelphia’s Salary History Ban Appealed to Third Circuit

The constitutionality of the Philadelphia ordinance aimed at regulating employers’ requests for and reliance on salary histories has been appealed to the U.S. Court of Appeals for the Third Circuit.

Both the City of Philadelphia and the Chamber of Commerce for Greater Philadelphia appealed U.S. District Judge Mitchell Goldberg’s decision to grant in part and deny in part entry of a preliminary injunction, issued at the end of April. In the 54-page opinion, Judge Goldberg held that the ordinance’s provision banning an employer’s inquiry about an employee’s prior salary violated the First Amendment, but he upheld the ordinance’s prohibition against the use of that information to set rates of pay.

While Judge Goldberg applauded the intent behind the ordinance, he found the City had failed to present sufficient evidence to support its argument that discriminatory pay is perpetuated by an employee’s disclosure of his or her prior wages to a subsequent employer.

The parties each filed their notices of appeal on May 25, 2018. For details of Judge Goldberg’s Opinion and Order, see our article, Philadelphia’s Salary History Inquiry Ban Violates the First Amendment, Federal Court Rules.

This case potentially implicates the state and local salary history bans that have recently passed around the country.

Jackson Lewis attorneys will continue to monitor this case closely and are available to counsel on the potential implications of the First Amendment challenge to Philadelphia’s ordinance.

 

Connecticut Bans Inquiries into Applicants’ Wage and Salary History

Connecticut is the latest state to prohibit employers from asking prospective employees about past compensation. Effective January 1, 2019, employers may not ask (directly or through a third party) about a prospective employee’s wage and salary history unless the prospective employee volunteers the information. Click here to read our full article regarding Connecticut’s salary history ban.

Vermont Bans Inquiries into Job Applicants’ Salary and Benefit History

Beginning July 1, 2018, employers in Vermont will be prohibited from requiring a prospective employee to disclose his or her salary and benefit history before making an offer of employment, with compensation, under legislation (H.B. 294) signed by Governor Phil Scott on May 11, 2018. Click here to read our full article regarding Vermont’s salary history ban.

Philadelphia’s Salary History Inquiry Ban Violates the First Amendment, Federal Court Rules

Philadelphia’s ban on salary history inquiries violates the First Amendment, a federal district court in Philadelphia has ruled in a 54-page opinion. The Chamber of Commerce for Greater Philadelphia v. City of Philadelphia et al., No. 17-1548 (Apr. 30, 2018). Because the decision is based on the First Amendment, it has broader implications for salary history inquiry bans passed by various state and local governments.

The case arose from a City of Philadelphia wage equity ordinance. The ordinance has two parts: a prohibition against inquiring about pay history, and a prohibition against relying on pay history in setting pay. Phila. Code §§ 9-1131. The prohibitions are necessary, the City argued, because allowing employers to set starting pay based on prior salaries perpetuates the pay gap resulting from historically lower pay for women and minorities. Phila. Code § 9-1131(1)(a) (citing United States Census Bureau Report 2015). Companies found in violation of the ordinance face civil and criminal penalties.

The Chamber of Commerce for Greater Philadelphia, on behalf of itself and several members, brought a civil action in federal court in the Eastern District of Philadelphia seeking to enjoin implementation of the ordinance on First Amendment grounds. The Chamber argued that the ordinance violates employers’ free speech rights.

U.S. District Judge Mitchell S. Goldberg of the Eastern District of Pennsylvania agreed that the salary history inquiry prohibition violates the First Amendment and enjoined implementation of that portion of the ordinance. He wrote, “I conclude that the city’s inquiry provision violates the First Amendment. Although the ordinance represents a significant positive attempt to address the wage gap, the First Amendment compels me to enjoin implementation of the inquiry provision.” The court noted that wage history information could be used for many lawful purposes, such as gathering market data, and not solely as a basis for determining future salaries.

However, the court ruled that the prohibition against relying on prior pay in setting starting salaries does not have First Amendment implications. The court rejected the argument that the reliance prohibition communicates a message about wage history and held that the prohibition does not regulate speech.

This decision is likely to prompt similar First Amendment challenges to other recently enacted pay history inquiry bans across the country.

Our Jackson Lewis Pay Equity Resource Group is available to assist with interpretation of current laws and counsel on the potential implication of law changes for employers.

New Jersey Governor Signs Equal Pay Bill

New Jersey Governor Phil Murphy signed the Diane B. Allen Equal Pay Act into law on April 24, 2018. The Act will take effect on July 1, 2018. The new law contains sweeping changes to the New Jersey Law Against Discrimination (LAD), including a prohibition against discrimination with respect to compensation or financial terms of employment, a six-year statute of limitations, and treble damages for violators. For details of the Act, see our article, Double Take: New Jersey Governor Poised to Enact Equal Pay Act.

Jackson Lewis attorneys are available to assist in identifying and addressing any pay disparities before the Act takes effect.

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