Legal Update November 10, 2017 New Laws in US Ban Salary History Inquiries Numerous states and cities—including California, Delaware, Massachusetts, Oregon, New York City, Philadelphia, and San Francisco—have recently passed laws prohibiting employers from requesting an applicant’s salary history during the hiring process. 1 These laws were passed in an effort to eliminate pay disparities based on gender. Although the laws vary, each prohibits an employer from inquiring about an applicant’s current or prior earnings or benefits. Such inquiries are generally prohibited regardless of whether the request is made by the employer or an agent acting on its behalf; is made to the applicant or others possessing information about the applicant’s current or prior earnings or benefits; or is implied or voluntary request for information. This Legal Update first summarizes the laws and then recommends steps to comply with these laws. Laws NEW YORK CITY On April 5, 2017, the New York City Council passed an amendment (Int 1253-2016) to the New York City Human Rights Law. The act was signed by Mayor Bill de Blasio on May 5, 2017, and took effect on October 31, 2017. Pursuant to guidance issued by the New York City Commission of Human Rights, the law applies to applicants for jobs in New York City and “likely” applies to applicants for jobs outside New York City who are interviewed in person in New York City. The amendment provides that it is an unlawful discriminatory practice for an employer, employment agency, or employee or agent thereof to (1) “inquire” about an applicant’s current or past salary, benefits or other compensation history or (2) “rely on” an applicant’s compensation history in determining what salary, benefits or other compensation to offer to the applicant unless the applicant discloses that information voluntarily and without prompting. To “inquire” is broadly defined to mean everything from asking the applicant or their former employer directly to conducting Internet or other searches to identify such information. “Benefits” and “other compensation” should be interpreted broadly. Examples include items such as retirement plans, bonuses, car allowances and commission earned. Salary history does not include any objective measure of the applicant’s productivity such as revenue, sales or other production reports. Employers can ask about the applicant’s book of business, profits generated or other objective indicators of performance, but employers cannot ask about an applicant’s current or former profit percentage. An employer can ask an applicant about competing offers and counter offers that the applicant has received and the value of those offers. The law explicitly permits an employer to “engage in discussion with the applicant about their expectations with respect to salary, benefits and other compensation, including but not 2 Mayer Brown | New Laws in US Ban Salary History Inquiries limited to unvested equity or deferred compensation that an applicant would forfeit or have cancelled by virtue of the applicant’s resignation from their current employer.” Pursuant to guidance issued by the New York City Commission of Human Rights, an employer is permitted to inquire into applicants’ expectations or requirements for salary, benefits, bonus or commission structure. Employers may also ask whether an applicant will have to forfeit deferred compensation or unvested equity from their current employer and the value and structure of the deferred compensation or unvested equity, request documentation to verify the applicant’s representations and consider such information in making the applicant an offer. Prospective employers can still conduct background checks of applicants to verify nonsalary information so long as the background check is otherwise permitted under the New York City Human Rights Law, which places limitations on when and under what circumstances employers may initiate background checks related to criminal history and credit history. In circumstances where an employer is legally permitted to perform a background check before a conditional offer has been made or decides to run a background check after a conditional offer is made, guidance issued by the New York City Commission of Human Rights recommends that employers specify to reporting agencies that information about salary history be excluded from the report. If an employer accidentally uncovers information about an applicant’s salary history, the employer may not rely on that information in determining what to offer the applicant in salary, benefits and other compensation. The law does not apply to inquiries specifically authorized or required by applicable federal, state or local laws, but there is no specific exemption for actions taken in accordance with foreign or international law. The law also does not apply to applicants for internal transfer or promotion or public positions for which salary is determined by a collective bargaining agreement. The law will be enforced by the New York City Commission on Human Rights, with penalties for “intentional malicious violations” ranging up to $250,000. Private causes of action will also be possible. OREGON The Oregon legislature passed the Equal Pay Act of 2017 on May 22, 2017, and it was signed by Governor Kate Brown on June 1, 2017. The law took effect on October 6, 2017. Among other provisions, the law contains a salary history ban. The law prohibits an employer from seeking salary history information about an applicant for employment or an employee. The ban applies regardless of whether the employer is seeking the information from an applicant or employee or from a current or former employer of the applicant or employee. The law expressly permits an employer to request from a prospective employee written authorization to confirm prior compensation after the employer makes an offer of employment to the prospective employee that includes an amount of compensation. “Compensation” is defined to include wages, salary, bonuses, benefits, fringe benefits and equity-based compensation. DELAWARE The Delaware legislature passed House Bill 1 on June 6, 2017, and it was signed by Governor John Carney on June 14, 2017. The law takes effect in December, six months after its passage. The law prohibits an employer from seeking the compensation history of an applicant from the applicant or from a current or former employer of the applicant. “Compensation” is defined to include monetary wages, benefits and other forms of compensation. The law applies broadly to agents acting on the employer’s behalf. However, an employer is not 3 Mayer Brown | New Laws in US Ban Salary History Inquiries liable for the actions of its non-employee agents if the employer can demonstrate that the employer’s agent was informed of the requirements of the law and instructed to comply by the employer. The law further prohibits an employer from screening applicants based on their compensation histories, including by requiring that an applicant’s prior compensation satisfy minimum or maximum criteria. The law expressly permits an employer to discuss and negotiate compensation expectations with an applicant so long as the employer does not request or require the applicant’s compensation history. The law also provides that an employer may seek an applicant’s compensation history— for the sole purpose of confirming the applicant’s compensation history—after an offer of employment with terms of compensation has been extended to the applicant and accepted. The law will be enforced by the Delaware Department of Labor. Violation of the law shall be subject to a civil penalty between $1,000 and $5,000 for the first offense and between $5,000 and $10,000 for each subsequent offense. CALIFORNIA The California legislature passed Assembly Bill 168 on September 14, 2017, and it was signed by Governor Jerry Brown on October 12, 2017. The law will take effect on January 1, 2018. The law prohibits an employer from seeking salary history information, including information on compensation and benefits, about an applicant for employment. The law applies broadly to agents acting on the employer’s behalf and to inquiries made orally or in writing. The law also prohibits an employer from relying on the salary history information of an applicant for employment as a factor in determining whether to offer employment to an applicant or what salary to offer an applicant. However, if an applicant voluntarily and without prompting discloses his or her salary history information, the employer may consider or rely on that voluntarily disclosed salary history information in determining the salary for that applicant. The law further requires that an employer provide the pay scale for a position to an applicant “upon reasonable request.” Although not directly addressed by the statutory language, it is reasonable to interpret the requirement as permitting the pay scale to be provided orally. MASSACHUSETTS The Massachusetts legislature passed An Act to Establish Pay Equity on July 23, 2016, and it was signed by Governor Charlie Baker on August 1, 2016. Among other things, the law contains a salary history ban that will take effect on July 1, 2018. The law prohibits an employer from seeking the wage or salary history of a prospective employee from the prospective employee or a current or former employer of the prospective employee. “Wage” is broadly defined to include all forms of remuneration for employment. The law also prohibits an employer from screening job applicants based on their wage history, including benefits or other compensation or salary history. The law further prohibits an employer from requesting or requiring that an applicant disclose prior wages or salary history as a condition of being interviewed or as a condition of continuing to be considered for an offer of employment. The law expressly provides that if a prospective employee has voluntarily disclosed his or her wage or salary history, the prospective employer may confirm the prior wage or salary. The law also provides that a prospective employer may seek or confirm a prospective employee’s wage or salary history after an offer of employment with compensation has been negotiated and made to the prospective employee. 4 Mayer Brown | New Laws in US Ban Salary History Inquiries SAN FRANCISCO On July 11, 2017, the San Francisco Board of Supervisors passed the Employer Consideration of Applicant’s Salary History Ordinance. The legislation was signed by Mayor Ed Lee on July 14, 2017, and will become operative on July 1, 2018. The ordinance applies to employers in San Francisco (defined as those required to be registered to do business in San Francisco) and to the City and County of San Francisco's contractors and subcontractors. The ordinance bans an employer from (1) considering or relying on an applicant’s current or past salary in determining whether to hire an applicant or what salary to offer the applicant; (2) inquiring about an applicant’s salary history; (3) refusing to hire or otherwise disfavoring an applicant for not disclosing his or her salary history; or (4) disclosing a current or former employee’s salary history to that person’s prospective employer without written authorization from the current or former employee unless the release is required by law, part of a publicly available record or subject to a collective bargaining agreement. The ordinance expressly provides that an employer may, without inquiring about salary history, engage in discussions about the applicant’s salary expectations, including but not limited to discussions regarding any unvested equity or deferred compensation or bonus that the applicant would forfeit by virtue of the applicant’s resignation from his or her current employer. Further, when an applicant voluntarily and without prompting discloses salary history to a prospective employer, the employer can consider that voluntarily disclosed salary history in determining the salary for the applicant. Prospective employers can still conduct background checks of applicants to verify non-salary information but may not rely on any compensation data disclosed during that process for purposes of determining an applicant’s compensation. The ordinance does not apply to individuals applying for a new position with their current employer. Further, salary history does not include any objective measure of the applicant’s productivity such as revenue, sales or other production reports. The ordinance will be enforced by the Office of Labor Standards Enforcement (OLSE). For a first violation of the law and for any violation before June 30, 2019, the OLSE must issue a warning and notice to correct. Starting July 1, 2019, the OLSE may impose an administrative penalty of no more than $100 for each violation after the first. Thereafter, the OLSE may increase the penalty to $200 for the next violation within a 12-month period and to no more than $500 for each additional violation. If the OLSE determines that prompt compliance is not forthcoming, the OLSE may refer the action to the City Attorney, who may initiate a civil action. In addition, the ordinance provides that the OLSE shall publish and make available a notice suitable for posting that informs applicants and employees of their rights under this ordinance. Employers shall post the notice in a conspicuous place at every workplace in San Francisco and shall send a copy of the notice to each labor union or workers representative with whom the employer has a collective bargaining agreement. The notice shall be posted in English, Spanish, Chinese and any language spoken by at least 5 percent of the employees at the workplace. PHILADELPHIA The Philadelphia City Council passed a salary history Ordinance on December 8, 2016, and it was signed by Mayor Jim Kenney on January 23, 2017. The law was originally scheduled to take effect in May 2017. However, the law has been challenged in court, and implementation is currently stayed pending the outcome of that lawsuit. The law prohibits an employer or employment agency from inquiring about a prospective 5 Mayer Brown | New Laws in US Ban Salary History Inquiries employee’s wage history. The law broadly applies to any employee or agent of an employer or employment agency. “[T]o inquire” is defined under the law to mean asking a job applicant in writing or otherwise, and “wages” is defined to mean all earnings of an employee, regardless of how calculated, and includes fringe benefits, wage supplements or other compensation. The law further prohibits an employer or employment agency from requiring disclosure of wage history or conditioning employment or consideration for an interview or employment on disclosure of wage history. The law also prohibits retaliation against a prospective employee for failing to comply with any wage history inquiry. The law does not apply to inquiries pursuant to any federal, state or local law that specifically authorizes the disclosure of verification of wage history for employment purposes. Compliance Guidance In order to comply with these new laws, employers should consider taking the following steps: • Remove questions seeking current or prior earnings or benefits from employment applications and new hire paperwork. Employers should also consider revising other documentation, such as any human resources guidelines, to expressly state that the employer prohibits representatives from inquiring about applicants’ current or prior earnings or benefits. • Train individuals involved in the hiring process, such as hiring managers and recruiting personnel, to: − Not ask questions about applicants’ current or prior earnings or benefits during the hiring process. − Not search public records in an attempt to learn about applicants’ current or prior earnings or benefits and not ask questions about current or prior earnings or benefits when checking applicants’ references or verifying prior employment. • Develop a set of recommended questions to be used during salary negotiations, such as “What are your expectations with respect to compensation?” • Designate specific HR personnel to address inquiries about salary ranges for each position. As noted, starting January 1, 2018, employers will be required to provide the salary range for applicants to its California offices “upon reasonable request.” • For compliance and verification purposes, document in the application file if an applicant makes a request for the pay scale for a position, the date on which the request was made and the pay scale provided to the applicant. • Draft a communication to outside search firms, recruitment agents and any outside agents who verify prior employment or perform background checks of applicants. The communication should direct such firms and agents to (a) not share applicants’ current or prior earnings or benefits with the employer and (b) not inquire into applicants’ current or prior earnings or benefits on the employer’s behalf. For more information about this topic, please contact any of the following lawyers. Kim A. Leffert +1 312 701 8344 firstname.lastname@example.org Marcia E. Goodman +1 312 701 7953 email@example.com Maritoni D. Kane +1 312 701 7125 firstname.lastname@example.org 6 Mayer Brown | New Laws in US Ban Salary History Inquiries Kristina M. Portner +1 202 263 3223 email@example.com Endnote 1 The Oregon and New York City laws took effect in October 2017. The Delaware law takes effect in December 2017. The California law takes effect in January 2018. The Massachusetts and San Francisco laws take effect in July 2018. The Philadelphia law has been challenged in court, and implementation is currently stayed pending the outcome of that lawsuit. Mayer Brown is a global legal services organization advising clients across the Americas, Asia, Europe and the Middle East. Our presence in the world’s leading markets enables us to offer clients access to local market knowledge combined with global reach. We are noted for our commitment to client service and our ability to assist clients with their most complex and demanding legal and business challenges worldwide. 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