Updated as of July 2018.
You’ve probably heard a lot about salary history bans being adopted across the country to help fight the gender pay gap. But fewer people are talking about why some states are passing legislation to prevent the bans.
The reason comes down to an issue that’s kind of a big deal for small business owners: compliance.
Some states have laws preventing local governments from passing legislation that conflicts with statewide employment laws, like paid sick leave requirements or salary history bans. This practice is called preemption, and the laws help prevent confusion for employers who would be unsure about which rules to actually follow.
Where you can—and can’t—ask salary history questions.
So far, nine states and eight local governments (plus Puerto Rico) have banned employers from asking candidates about their pay history.
Michigan and Wisconsin, on the other hand, recently passed laws preempting pay history bans, and Philadelphia—the first US city to pass the salary history ban—found its ban unconstitutional last month. In Iowa, Tennessee, and North Carolina, preemption legislation already exists that would prevent such bans from being passed.
Why some states are banning salary history bans.
Having one set of local laws can make it easier to understand what practices businesses need to comply with, resulting in fewer fines for business owners.
When local and state laws differ, it can be especially taxing for small businesses, according to Eric Bott, state director of Americans for Prosperity Wisconsin. “From an employer perspective, they cannot function with a patchwork quilt of regulations,” he tells Bloomberg Law.
Why salary history bans are important.
Salary history bans began to gain momentum as a way to address unequal pay between women and men. The sad reality is that women typically earn 80 cents for every dollar a man earns. Some may argue that banning pay history questions won’t solve our bias issues, but it does put a spotlight on the issue.
“It forces companies to sit down and say: ‘OK, why were we doing this before? How should we set compensation now that we don’t [use pay history]?’” Paradigm founder Joelle Emerson tells the New York Times.
Want to stay compliant and do the right thing? Don’t wait for the law. Nix the question yourself.
It’s important to know what rules you need to follow according to the law, but there’s a good case for throwing out the salary history question either way.
“We’ve seen a lot of [businesses] adopting the spirit of law, understanding bans on salary history inquiries are about pay equity,” Mollie Mantia, director of compliance for ADP Talent, told the Wall Street Journal.
Big businesses like Amazon, Wells Fargo, American Express, Cisco, Google and Bank of America have stopped asking salary history questions during their hiring processes. A WorldatWork study found that 37 percent of surveyed employers have done the same, and 40 percent of the employers who haven’t are likely to do so in the next year.
Even in places where employers can ask salary history questions, there may be laws preventing them from using that information to set pay rates, like in Philadelphia and Washington.
So while lawmakers sort out the details, you can start reshaping your internal pay policies for the future:
- Even if you ask salary history questions, don’t use them to determine your team’s salary.
- Do as much research as you can about the market and your peers.
- Train your hiring managers on how to follow the new laws.
- Don’t release salary information for previous employees.
- Institute a negotiation process that lets candidates advocate for themselves.
Salary history bans are only one potential solution to the pay gap dilemma. Keep an eye on where bans are being passed, and create a hiring process that helps employees earn what they’re really worth.