Calif. Adopts New Salary History, Pay Scale Requirements

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On Oct. 12, 2017, California Gov. Jerry Brown signed a new law that restricts employers’ use of applicants’ salary history during the hiring process. This law will also require employers to provide the applicable pay scale to an applicant upon request. To comply with this law, impacted employers likely will have to revise employment applications, retrain human resources personnel and hiring managers, and develop pay scales for all positions. 

 The law prohibits employers from:

  1. asking applicants, orally or in writing, what the applicant earned (or received in benefits) during any prior employment; and
  2. relying on an applicant’s salary history as a factor in determining whether to hire the applicant or how much to compensate the applicant as a new employee.

Interestingly, the new law expressly allows an applicant “voluntarily and without prompting” to disclose his or her salary history to a prospective employer, in which case an employer may “consider[] or rely[]” on this information. However, California law already prohibits employers from justifying a disparity in pay between employees based on an employee’s salary history. Thus, California employers remain restricted in their use of salary history even if an applicant volunteers this information.

The new law also requires employers to provide applicants with “the pay scale for a position” to which they are applying. Notably, the law does not define “pay scale,” though this term presumably refers to the range of salaries that an employer pays the employees in a given position. This aspect of the legislation imposes a burden on employers that do not already maintain such pay scales, and could lead to pay-disparity litigation once this information is in the hands of applicants and employees. This requirement also goes further than similar salary-history laws in other jurisdictions.

As discussed in a previous McGuireWoods legal alert, “9th Circuit to Reconsider Employer Use of Salary History During Hiring,” this new California law is part of a nationwide trend to prohibit employers from using salary history during the hiring process. Several other states, territories and cities — including Delaware, Massachusetts, Oregon, Puerto Rico, New York City, Philadelphia, San Francisco, Pittsburgh and New Orleans — in recent years also have prohibited employers from asking applicants about salary history. Employer use of salary history also faces judicial scrutiny, as the  U.S. Court of Appeals for the 9th Circuit prepares to hear oral argument on Dec. 11 regarding whether employer use of salary history during hiring violates the federal Equal Pay Act. 

California’s law takes effect Jan. 1, 2018. To prepare, impacted employers should consider the following:

  • Preparing or updating current pay scale summaries for California
  • Removing requests for salary history from job applications
  • Training human resources personnel on how to respond if an applicant volunteers his or her salary history or requests the pay scale for the position in question
  • Educating hiring managers on the types of prior employment information they can and cannot consider in determining who to hire and how much to pay them

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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