In a continuing effort to combat pay discrimination, Governor Jerry Brown recently signed AB 168 into law. Beginning January 1, 2018, all California employers are prohibited from seeking, by any means, salary history from an applicant for employment.
Existing California fair pay laws prohibit employers from relying upon prior salary history by itself, i.e. as the sole factor, to justify a pay disparity between employees of different genders, races or ethnicities who perform substantially similar work. The new law, like the San Francisco “Parity in Pay ” Ordinance (which will go into effect on July 1, 2018 and protect applicants for jobs to be performed within city limits) goes further by imposing an outright ban on relying upon such history, even in concert with other factors, to determine both whether to make an offer, and the salary for the position.
Summary of the Laws
The state law prohibition extends not merely to base salary history, but also to the applicant’s “compensation and benefits” history, and while this phrase is not defined, a reasonable interpretation is that it covers all forms of compensation (commission and bonus history, etc.). The SF ordinance definition of “salary history” expressly includes commission compensation history and any other compensation for services. However, the ordinance expressly excludes from the definition of salary history any “objective measure of the applicant’s productivity such as revenue, sales, or other production reports.” A reasonable interpretation of this exclusion is that employers may lawfully inquire about and receive data on, for example, a salesperson’s non-confidential revenue achievement, performance against sales targets/quotas, etc., but must avoid asking about commission rates and actual commission and bonus dollars earned. The new state law is silent as to whether such non-monetary performance information is a permissible area of inquiry.
Importantly, both the state law and the ordinance permit an employer to consider salary history when it is voluntarily disclosed by the applicant, and to then rely upon that information to determine the salary for the applicant. Both laws also permit employers to consider and rely upon publicly available salary history.
Next Steps
In light of these new laws, it is prudent for employers to (1) remove requests for salary history from applications, scripts and talking points used by interviewers and any other formal or informal application and recruiting documentation, and (2) advise and train personnel—principally, hiring managers, anyone who will interview or otherwise be meaningfully involved in the recruitment process, and recruiters (both internal and external)—about the new laws.
Finally, the exception in both laws allowing employers to lawfully consider salary history when it is voluntarily disclosed triggers two basic, but important, takeaways. First, any discussion of salary history must be explicitly initiated by the applicant. Second, if the applicant is eventually offered a salary that is either higher or lower than that of employees performing substantially similar work, there must be at least one other unassailable factor in place—differential education, training, experience, etc.—justifying the disparity.