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Hiring Best Practices: Salary History Bans and Pay Transparency

By Chelsea Betcher - McMahon Berger P.C.

September 28, 2022

It is a common practice for employers to evaluate and compare applicants based on many factors – including prior salaries and pay expectations. This practice can be problematic, however, as relying too heavily on salary history in hiring, promoting, and wage decisions has been deemed harmful in the effort to close wage gaps and pay disparities among women and minorities. To address pay discrimination, states and localities have been enacting laws that prohibit employers from asking about an applicant’s salary history. While this movement has a brief history, the trend has continued as more and more jurisdictions are enacting salary history bans each year.

As of now, 21 states have restricted an employer’s ability to inquire about an applicant’s salary history, along with 21 other localities. The laws vary in degree of restriction; some only restrict employers from asking about an applicant’s salary history, while others apply to both applicants and existing employees. Further, some laws allow employers to discuss salary expectations, while others go as far as to prohibit employers from searching on the internet for salary histories altogether.

While Missouri currently does not have a statewide ban, some local ordinances have been enacted. For example, Kansas City restricts employers from relying on a job applicant’s salary history when deciding to offer employment or in determining salary, benefits, or other compensation during the hiring process. However, the law does permit employers to ask about the applicant’s expectations regarding compensation. St. Louis also has a local ordinance which restricts City employers from: (1) inquiring about an applicant’s salary history, or (2) refusing to hire or otherwise retaliate against applicants for refusing to disclose salary history. Notably, St. Louis’s ordinance applies to only public employers – as do many of the others. It is also important to note that these restrictions do not apply to individuals who voluntarily disclose information related to pay or wages.

In the same vein as salary history bans, some states are taking it a step further to promote transparency for wages, benefits, and other compensation. Illinois, for example, now requires certain employers doing business in the state to provide employee-level pay data to the Illinois Department of Labor every other year. While the data will be anonymous as to the specific business and employee, it will provide pay data available to the public for job title or classification.

Likewise, California has enacted a new law (S.B. 1162) which requires California companies with 15 or more employees to disclose pay starting in 2023 by making salary ranges for positions available to applicants and employees. In addition, California companies with 100 or more employees will be required to report to the state their employees’ mean and median pay by race and gender. California follows Washington, Colorado and New York City in requiring such disclosures (New York state is expected to enact a similar law as well).

As these trends continue, it is important for employers to retain experienced employment counsel for guidance in their hiring practices and to stay up to date on state and local laws to avoid violating such restrictions.

www.mcmahonberger.com

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