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Employers face laws forbidding salary history queries

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Employers are starting to contend with a wave of laws around the country forbidding them from asking job applicants about past salary history.

They say the motivation surrounding the laws is concern that women in particular have suffered from pay disparities compared with men that self-perpetuate as they move from job to job and report their salary histories.

These laws are intended to rectify the situation by paying them equitably, these experts say.

But the laws can present challenges to employers, including the fines their violation can impose. They also present logistical difficulties for employers that operate in different jurisdictions because of variations in the laws. Furthermore, the laws may be vague or ambiguous in some cases as to whom they apply.

Coverage is likely to be included in firms’ employment practices liability policies, experts say.

They advise companies to introduce application forms that reflect the most stringent of these laws and train their job interviewers in questions they can and cannot ask.

Jurisdictions that have passed salary history laws include California, Delaware, Massachusetts, Puerto Rico, San Francisco and New York City.

Philadelphia has also approved a law, but its implementation has been stayed pending the outcome of a lawsuit filed by the local Chamber of Commerce. Legislatures in New Jersey and Illinois passed laws that were vetoed by their governors.

“It’s impossible to keep up, let alone comply, things are happening so fast,” said David M. Wirtz, a shareholder with Littler Mendelson P.C. in New York.

Salary history laws are part of the trend toward gender pay equality “that’s sweeping the country,” said Eve I. Klein, a partner with Duane Morris L.L.P. in New York.

They are based on the theory that a woman who has been discriminated against in the past “shouldn’t be stuck with the compensation that she’s been receiving recently” and paid at the lower end of the employer’s salary range, said Ms. Klein.

An increase in such laws can be expected, she said. “I think in the next few months you’re going to see several more of these pass,” she said.

The laws present a big problem for employers, said Ms. Klein. “You want to hire someone at the right salary. You don’t want to overpay,” and many factors can contribute to paying a higher or lower salary, with the “vast majority having nothing to do with discrimination,” she said.

“It worries me that that employers are going to be a little bit defenseless,” said Mr. Wirtz. If an applicant volunteers his or her salary and the interviewer makes a note of it, and then the applicant later claims the information was solicited, “how are you going to prove it was volunteered?” he asked.

The laws also present a compliance challenge.

“The devil is in the details,” said Leanne C. Mehrman, a partner with FordHarrison L.L.P. in Atlanta. “Each location, whether it be a state or city law, has varying details contained in the law, which makes it difficult for employers to be compliant in every location in which they operate.”

If you are an employer elsewhere that is hiring for a New York City office, “how could you possibly know not to ask that question” about salary, said Joseph N. Gross, a partner with Benesch Friedlander Coplan & Aronoff L.L.P. in Cleveland.

“There’s going to be a lot of unintended consequences for companies that don’t just hire people at their headquarters building which they’re going to have to deal with,” he said.

Experts point to penalties associated with the laws. Depending on the jurisdiction, fines can be some combination of back pay, benefits or other compensation, liquidated and punitive damages, attorneys fees and costs, said Ms. Mehrman.

In New York City, for example, where a law went into effect Oct. 31, the New York City Commission on Human Rights can impose a civil penalty of up to $125,000 for an unintended violation, and up to $250,000 if the violation is willful and malicious, under the city’s administrative code.

Experts say there may be coverage through firms’ employment practices liability insurance policies. “Employers should review their policies to make that determination,” said Ms. Mehrman.

Advice that experts offer on the issue include:

  • Review any documents that include references to salary history, including applications, background checks and job postings.
  • Train interviewers not to ask questions on pay history.
  • Be aware of further changes in the law.

“It’s rapidly changing, and it has the potential for large monetary damages,” Ms. Mehrman said.