Delaware Follows Trend of Banning Compensation History Inquiries in Effort to Reduce the Gender Pay Gap

by Hinshaw & Culbertson LLP
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In a developing trend, Delaware followed Massachusetts, Oregon, New York City and Philadelphia, in enacting legislation directed at ensuring equal wages between genders.  On June 14, 2017, Governor John Carney signed legislation, which prohibits prospective employers from asking job applicants about their salary history.  The reasoning behind these laws is that wage disparities are perpetuated when current pay is based on past salary decisions that may have been based on gender.  Rather, employers are encouraged by these new laws to assess potential pay based solely on merit, experience of the job applicant and the market rates.

Pursuant to Delaware’s law, prospective employers, or their agents (think recruiters or staffing agencies), are prohibited from seeking or requiring job applicants from providing prior compensation history.  “Compensation” is defined as “monetary wages as well as benefits and other forms of compensation.”  The law does not define what is meant by “other forms of compensation” and, thus, it is unclear how broadly the law will be applied. 

Nothing in the new law prohibits an employer or an employer’s agent and applicant from “discussing and negotiating compensation expectations provided that the employer or employer’s agent does not request or require the applicant’s compensation history.”  Similar to the Massachusetts law, which the Observer covered last year, the Delaware law does not expressly prohibit salary negotiations and does not prohibit discussion of salary history, if the applicant volunteers this information.  Additionally, an employer may seek the applicant’s compensation history after the employer has extended an offer of employment with terms of compensation.      

An employer will not be liable for the acts of its agent, who is not an employee, provided that the employer can demonstrate that the agent was informed of the requirements of the law and instructed to comply.  The state included this provision to address employers' concerns regarding the use of headhunters or recruiters, who are not employed by the employers and operate without direct oversight by employers. 

The Delaware Department of Labor has the power to enforce the new law, and is responsible for posting the requirements of the statute on its website and to perform outreach to educate employers.  Any employer or employer’s agent who violates the new law is subject to civil penalty of not less than $1,000, nor more than $5,000 for the first offense and not less than $5,000 nor more than $10,000 for each subsequent violation.  Importantly, however, actions that violate the provisions of the new law that pertain to interviewing and hiring for a single position shall constitute a single violation.  In other words, regardless of the number of job applicants that apply for a single position, if an interviewer or application violates the provisions of the law for all applicants, it is still deemed to be one violation.

The Delaware law takes effect in December, 2017.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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