It can be tough keeping up with all of the changes coming out of Washington and Sacramento; it seems every hour there’s an announcement on new or modified regulations in the workplace.

On January 1^st, 2018, California unveiled a new law prohibiting employers from using an individual’s prior salary as a factor in setting pay rates. This law extends to public and private employers, as well as their agents, and it mandates that employers may not seek any information about an applicant’s current or past “compensation and benefits.”

That’s right. California’s salary history ban makes it illegal for employers to ask candidates how they are currently (or were formerly) compensated at work.

Let’s take a quick look at the 3 most important things you and your supervisory team need to know about determining pay rates in this restricted environment.

1. Don’t Ask, Don’t Tell… Don’t Even Think About it!

Under the new law, you must stop;

• Asking candidates (whether in person or on a job application or other form) about their former salaries, pay rates, bonus amounts, and/or benefits;
• Considering salary history in deciding whether to hire an individual or in deciding how much to pay a candidate; and
• Disclosing a current or former employee’s salary without specific written authorization.

These laws apply to anyone acting as an “agent” of the company, so even if you’re using an executive search firm, such as Peoplescape Consulting Group, no one can ask, or consider, a candidate’s salary history in the hiring process.

If applicants voluntarily disclose salary information or past earning information that’s ok. Document it but don’t use it to justify a pay gap, ensure you have additional ways to determine a new hire’s salary.

2. But I Use Current Salary to Determine How Much to Pay Someone

Instead of asking for someone’s salary history, tell the candidate what the salary range is for the role, and then see if they want to continue the conversation. Many companies are now including pay scales in job postings. Alternatively, ask them what compensation they are ‘seeking’ for this position.

Best Practices:

• Compensation history includes both salary and benefits, so don’t ask applicants about the value of their benefits either. Best practice is to ask if there are benefits that a candidate may be giving up by coming to work for you, and if that would be a barrier to them accepting a role, should one be offered.
• If an applicant makes a “reasonable request” to learn about the position’s pay scale, you must be prepared to provide it. Track when applicants requested the information and how their requests were satisfied. State that it is dependent on qualifications and experience. This helps applicants determine if the position is appropriate for them.

3. OK, but WHY?

Gender pay inequality continues to be a problem in the United States. A Glassdoor study showed that women still earn 76 cents to the dollar men earn. And according to U.S. Census data, women in San Francisco earn 84 cents for every dollar their male counterparts earn. Black women earn only 60 cents for every dollar, and Latina women only 55 cents.

This salary history ban aims to solve one part of the problem: to prevent current or previous pay inequality from following a person throughout their career. Determining a candidate’s compensation based on their salary history can maintain existing wage inequalities that are the result of gender bias or discrimination.

Next Steps

In a recent Lexology post, Ogletree Deakins attorneys suggest these next steps for California employers:

• Review hiring documentation and practices to address salary inquiries.
• Train hiring managers and interviewers to avoid salary inquiries and to respond appropriately to employment verification requests that seek salary information.
• Pay attention to changing pay equity laws.
• Refrain from releasing salary information for past employees. Don’t release a former employee’s salary history without written authorization from that employee.

The Takeaway

Someone’s salary history should never affect their compensation in future roles. Before you ever bring your candidate into the office, research compensation standards for the role you’d like to fill, and consider their skills, background, and education to determine a final offer. Take this data-driven approach and be fair and transparent, and to attract and retain the best talent on the market. Contact a Peoplescape Consultant today to get your compensation strategy started.