New Jersey has enacted a new law prohibiting employers from seeking or relying on job applicants’ salary history.

Lieutenant Governor Sheila Oliver (acting on behalf of New Jersey Governor Phil Murphy) has signed legislation that prohibits employers from requesting or relying on a job applicant’s salary history in hiring and pay-setting decisions. The law will take effect on January 1, 2020.

A.B. 1094 comes a year after New Jersey’s passage of the New Jersey Equal Pay Act (codified as P.L. 2018, c.9), which precludes an employer from paying an employee of any protected class at a lower rate than other employees with similar job duties, unless the employer has a legitimate business reason for the differential.

New Jersey’s new salary history ban bars employers from screening job candidates based on wage, salary, and benefits history or requiring a salary history satisfy any minimum or maximum criteria. The law further proscribes an employer from requiring candidates to disclose past salaries. Under the new law, if the applicant voluntarily provides his or her salary history without prompting, employers may verify salary history and factor in the information into salary, benefits, and compensation decisions.

The law does not apply to internal transfers or promotions, an employer’s use of knowledge acquired through the candidate’s prior employment with the business, or when a federal law or regulation mandates the disclosure of a candidate’s salary history.

Further, where the position involves incentive or commission plans, the New Jersey law authorizes an employer to inquire about an applicant’s previous experience with incentive and commission plans, so long as the employer does not seek information on the applicant’s previous earnings from those plans.

Additionally, an employer’s attempt to obtain or verify an applicant’s disclosure of non-salary-related information when conducting a background screening does not violate the law if the employer states in its request that salary history is not to be disclosed. If salary history is disclosed, employers may not retain the information or consider it when determining compensation for the applicant.

Employers who violate New Jersey’s salary history ban face fines of up to $1,000, $5,000, and $10,000 for the first, second, and third violations. Employers also risk additional penalties under the New Jersey Law Against Discrimination.

The law addresses a gap in the Diane B. Allen Equal Pay Act. Specifically, while the Equal Pay Act sets forth specific standards an employer must meet to justify a pay disparity for employees who perform substantially similar work (e.g., seniority system, merit system, or the 5 factor test set forth in the statute), the law is silent as to employer inquiries into a prospective employee’s compensation or benefits. This law eliminates any such ambiguities or confusion with respect to such inquiries. In fact, the law permits a multi-state employer to maintain compensation history inquiries on application forms so long as the employer includes a disclaimer “immediately preceding the salary history inquiry on the employment application […] that an applicant for a position the physical location of which will be in whole, or substantial part, in New Jersey is instructed not to answer the salary history inquiry.”

Employers should review and revise their hiring practices and policies to ensure compliance with the laws in the states in which they operate. Jackson Lewis attorneys will continue to monitor pay equity developments. Please contact us with any questions about the potential implications of New Jersey’s salary history ban or other legal developments.