A Mid-Year Compliance Report: Pay Equity Laws

Last week, we explored some of the legislation and compliance changes that have occurred so far in 2020 in the ban the box space. This week, we’re continuing our mid-year compliance report with a glimpse at additional regulations that employers must be aware of: pay equity and salary history laws. 

In the past, it hasn’t been uncommon for employers to inquire about salary histories when vetting new job candidates. Sometimes, candidates have been asked to self-report their past salary amounts as part of the “employment history” section of a job application. In other situations, hiring managers might ask about salary history as part of an employment history verification check—a background check that also incorporates questions about job titles, work responsibilities, and employment dates.  

Pay equity laws, or salary history bans, are noteworthy for employers because they prohibit these inquiries. These laws may directly affect your organization’s job applications or background checks. 

Why are pay equity laws becoming more common in the United States? These laws are intended to help close the salary gaps between men and women, whites and minorities, and other groups by stopping employers from basing salary decisions on how much money a candidate made at a previous job.  

It has become a common criticism in recent years that looking at candidate salary histories either consciously or unconsciously perpetuates pay discrepancies and prevents women or minorities from being paid as much for a job as a white male. Pay equity laws are intended to fix this problem by barring employers from using salary history checks to decide on a salary to offer a candidate. 

A few states, cities, and jurisdictions that have implemented pay equity measures in 2020: 

• New York. New York’s salary history ban has been on the books since 2017, so this pay equity law isn’t new, but it received an amendment this year. The amendment clarifies that the law—which bars employers from asking about a candidate’s salary history—applies to situations in which employers are based outside of New York but are hiring people to work within the state. The new version of the law has been in effect since January. Despite the amendment, the law still does not apply to workers who are not considered “employees,” such as freelancers and independent contractors.
   
• Maryland. Maryland also amended an existing pay equity law recently, adding provisions that require employers to provide candidates with a wage range for each job that they post. The law also prohibits employers from retaliating against job applicants who ask for a wage range for a job. The amendments kick in on October 1.
   
• Philadelphia. Philadelphia has a pay equity law that dates back to 2017. Since the law was first passed, it has faced some legal challenges for allegedly being an unconstitutional limitation on the practice of free speech. Those challenges put a lengthy delay on how the law can be enforced, but the ordinance has been upheld by a United States appellate court. The law makes it illegal for any Philadelphia employer to ask prospective employees about their wage history or use salary history information “in setting or negotiating” wages. The ordinance officially went into effect on June 5.
   
• Toledo. Starting on June 26, employers in Toledo, Ohio are barred from including inquiries about salary history in the candidate screening process. Employers are not allowed to consider wage history information when extending a job offer or making a hiring decision, and they must present wage ranges for all jobs. 

As you can see, salary history bans can impact everything from job listings to employment applications to background checks to the conversations you have with candidates about compensation and benefits. Just as it is critical to follow the FCRA to the letter to avoid lapses in compliance, it’s vital to read these laws thoroughly and update your policies if you are hiring candidates in affected locations. 

At backgroundchecks.com, we can help by excluding wage history from our very thorough employment verification screenings. Contact us today to learn more. 

Sources: https://www.forbes.com/sites/alonzomartinez/2020/07/10/what-employers-might-have-missed-in-the-first-half-of-2020-from-ban-the-box-laws-to-marijuana-measures-a-midyear-compliance-update/#6c60900561a6