The Salary-Question Ban

A business is often only as good as the people running it, which is why employers are always looking for the most qualified candidate they can afford.  For many businesses, personnel costs make up a significant portion of the business’s expenses.  To ensure that a business can attract the most competent and qualified candidates, it is essential to set a competitive wage for each position.  Determining the value of and salary for each position can be a balancing act which depends on market conditions as well as the business’s bottom line.  To aid in this important decision, employers may ask a candidate’s current or prior salary in order to gauge whether to move forward with the often resource intensive interviewing and hiring process. 

There is a trend in an ever-growing number of cities and states to ban employers from asking candidates about their salary history.  The purported intention of the ban is to reduce pay discrimination, particularly between male and female candidates, but also other minority candidates as well.  The theory is that by banning employers from asking about salary history, a candidate will not be pigeonholed into a lower salary bracket simply because she made less at her prior or current job.  Employers are benefited, the argument goes, because they will be sure that they are hiring the best candidate for fair market value, without unintentionally discriminating against anyone.

Philadelphia was one of the first places to implement such a ban.  On January 23, 2017, the Ordinance, which amends the City’s Fair Practices Ordinance: Protections Against Unlawful Discrimination by adding a new chapter on wage equity (which can be found at Phila. Code §§ 9-1103, 9-1131), was signed into law and intended to go into effect on May 23, 2017.  It was promptly met with opposition, and the Chamber of Commerce for Greater Philadelphia filed suit challenging the Ordinance as violating the First Amendment, the Due Process Clause of the Fourteenth Amendment, and the Commerce Clause of the U.S. Constitution, as well as the Pennsylvania Constitution and Pennsylvania’s First Class City Home Rule Act. 

Philadelphia’s Ordinance banned employers from inquiring about a candidate’s wage history or relying on that wage history in determining that candidate’s wages, unless the candidate had disclosed their wage history knowingly and willingly.  Violation of the City’s Ordinance would result in a $2,000.00 fine for a first offense, and an additional $2,000.00 plus 90 days in jail for repeat offenses.  The Chamber of Commerce’s suit is still pending, however, so the effect of the ban in Philadelphia is not yet clear.

What is clear is that this type of ban is becoming more and more widespread.  Twenty-five states, territories and cities have proposed or enacted similar bans[1], with New York City’s salary question ban going into effect October 31, 2017.  Some jurisdictions have differentiated between public and private employers, but the majority have banned the salary question for all employers.

As the Chamber of Commerce states in its suit, employers often rely on a candidate’s prior salary history to determine whether they will be able to offer a salary attractive enough to not only obtain, but also retain, a particular candidate.  Not having this information, they argue, may make it more difficult to determine an appropriate offer for a given candidate.  Notably, many of the jurisdictions proposing or enacting these bans prohibit a potential employer asking only about actual salary history; however, employers may still ask about salary expectations.  In this way, an employer may still be able to gauge whether its company will be a good fit for a particular candidate, at least salary-wise.

Even without asking a candidate’s salary history, it is still possible to look at the broader market for the type of position the business is seeking to fill and determine a fair salary.  This may take more legwork on the part of the employer, but chances are your candidates are doing similar research in preparation for salary negotiations.  This will ensure that your company is competitive in the hiring market, the effect of which may be to entice more qualified candidates.  Of course, the decision regarding what to offer a candidate will be influenced by factors unique to that particular candidate such as experience, education and skill set.  Having an idea, however, of the going market rate for the position you are seeking to fill will help you to realistically evaluate a candidate’s value against the market average.

Given the widespread enactment of the salary question ban, which affects at least Pennsylvania’s two largest cities, employers would be wise to begin to conform their hiring process accordingly.  Employers should review their job applications and remove any questions relating to salary history, and ensure that hiring personnel are instructed not to ask salary history questions, reframing the question to focus on salary expectations instead. 

Faye C. Cautin, Esquire recently joined the law firm of Wolf, Baldwin and Associates, P.C., which has offices in Pottstown, West Chester, and Reading.  The firm has represented employers and employees in business matters and litigation for over 30 years.  She may be reached by calling 610.323.7436, or by e-mail at fcautin@wolfbaldwin.com.

[1] Currently these include California; Connecticut; Delaware; Georgia; Iowa; Idaho; Illinois; Maryland; Maine; Massachusetts; Mississippi; Montana; North Carolina; New Jersey; New Orleans; New York City; Oregon; Pennsylvania (Philadelphia and Pittsburgh, specifically); Puerto Rico; Rhode Island; Texas; Virginia; Vermont; Washington; and Washington D.C.

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