It is that time of year.  We continue to wait for the Governor to sign or veto some controversial bills such as:

  • The Stand Act (prohibiting confidentiality in harassment and sexual assault settlements); and
  • AB 3080 (prohibiting mandatory arbitration for new and current employees, but presumably allowing arbitration with an opt out, and prohibiting nondisclosure of harassment issues to protect future employees going forward).

As we wait, there was one bill recently passed that clarifies a few things about California’s salary history ban that is worthy of a quick mention.

As you may recall, effective this year, employers were prohibited from asking an applicant about his/her salary history.  Employers are also required to provide pay scale information to an applicant on the position applied for upon reasonable request.  Recently, some of those terms have been clarified, as follows:

  1. First, an applicant is now defined as an individual seeking employment who is not currently employed with that employer in any capacity or position.  So current employees are not entitled to pay scale information.
  2. Second, a reasonable request, is now defined as a request made after an applicant has completed an initial interview with the employer.  This would prevent someone not qualified for a position from obtaining salary range information about it.
  3. Third, pay scale is defined as a salary or hourly wage range for the position.  Not quite sure what the confusion was there.
  4. Fourth, as most of us already surmised, it is perfectly acceptable to ask an applicant about his/her salary expectations.
  5. And finally, while prior salary cannot justify any disparity in compensation, an employer can consider current salary as a factor to justify a wage differential as long as it is based on:
    • A seniority system;
    • A merit system;
    • A system that measures quality or quantity of production; or
    • A bona fide factor other than sex, race or ethnicity (such as education, training, or experience).

Now if only the legislature would take up some very serious issues facing employers, especially after Dyanmex (and the resulting war against contractor status), such as my personal favorite idea, to create a new category of workers called “dependent contractors”.  Maybe next term.  One can always hope.

California’s Fair Pay Act, already the broadest in the nation, has now been expanded in two key aspects:

Pay day
Copyright: rawpixel / 123RF Stock Photo

First, the Governor approved SB 1063, so that the Fair Pay Act now protects against race-based disparities in pay.  Specifically, employees who perform “substantially similar work” under similar working conditions, must be paid equally, unless the employer can demonstrate that the wage differential is based on either:

  • A seniority system;
  • A merit system;
  • A system that measures quality or quantity of production; or
  • A bona fide factor other than sex, race or ethnicity (such as education, training, or experience).

Second, the law already requires that each factor must be relied on reasonably and account for the entire wage differential.  That part of the Labor Code has now been amended by AB 1676, to clarify that “prior salary shall not, by itself, justify any disparity in compensation.”

Clearly, the idea here is that initial wage differentials in hiring become compounded over the years if each subsequent employer relies on that prior wage rate.  Why pay someone $50k, when you know she (or now he) would be happy with $40k based on her/his current salary?  Going forward, the applicant will need to be paid what the position is worth, not just that she/he will take based on prior salary level.  Sounds fair, right?

Well, sounding fair and ease of implementation are two very different things.  I can only imagine the questions that will arise for employers who try to justify why one applicant (someone they really want to hire) can’t be paid a premium without bumping up everyone else in a substantially similar position.  And as we have pointed out here, the burden of demonstrating fairness is entirely on the employer, and here, that logic really plays no role.

Quite frankly, what the Fair Pay Act really requires is an overhaul of hiring practices for HR professionals in California.  Gone are the days when management can exercise discretion to negotiate salaries based on an applicant’s prior salary history, or the applicant’s negotiation skills.  Whether that is a good or bad thing for business in California remains to be seen.

 

Seven months ago, Governor Brown vetoed a bill (AB 1017) that would have prohibited California employers from asking applicants about their salary history. Now a new bill that contains some of the same language, AB 1676, is before the legislature. Under both AB 1676 and its predecessor:

Copyright: liravega258 / 123RF Stock Photo
Copyright: liravega258 / 123RF Stock Photo

An employer shall not, orally or in writing, personally or through an agent, seek salary history information, including, but not limited to, compensation and benefits, about an applicant for employment.

The new bill hasn’t made it very far and there’s no reason to believe it will fare better than AB 1017. But even if it doesn’t pass, should employers ask applicants about their prior earnings? I can think of three good reasons not to.

  • First, under California’s Fair Pay Act, salary history is not a proper justification for a pay disparity. So you can’t use that as a basis for paying one worker more than a co-worker who is performing “substantially similar” work. It’s easier to argue that you didn’t rely on this impermissible factor if you didn’t seek out the information.
  • Second, there seems to be growing sentiment that the question is improper and overly intrusive. For example, Alison Green, who writes the Ask a Manager blog, wrote this piece for US News giving tips on how to avoid answering the question directly.
  • Third, if you’re looking to fill a position, you should have some idea what people in that position make and what the value is to your organization. If you genuinely have no idea, maybe the benefits of asking the question outweigh the risks. But in most situations, asking for information that you’re prohibited by law from relying on is a bad idea.

Of course, if the legislature passes the measure prohibiting salary history inquiries, the issue will be moot.

Here’s another fun aspect of AB 1676. It says that: “an employer, upon reasonable request, shall provide the pay scale for a position to an applicant applying for employment.” I’ve never heard of such a requirement before. Even if you make applicants sign nondisclosure agreements, isn’t it just a matter of time before your competitors know what you’re paying your workers? While we may get into this in more detail in a later post, I’ll say now that I think it’s a very bad idea. I also think the legislature knows that, since they’ve had the foresight to specifically exempt themselves from that requirement.

UPDATE: On June 2, 2016, the Assembly passed AB 1676. It now heads to the Senate.

Are you worried about the threat posed by prior-salary-question-askers? Well then you can sleep soundly knowing that your California Legislature has tackled this thorny issue.

AB 1017, one of the bills sitting on the Governor’s desk from the last legislative session, would add language to the California Labor Code saying:

An employer shall not, orally or in writing, personally or through an agent, seek salary history information, including, but not limited to, compensation and benefits, about an applicant for employment.

Copyright: olegdudko / 123RF Stock Photo
Copyright: olegdudko / 123RF Stock Photo

Proponents of the measure say that such questions can continue the effects of past discrimination. But so can questions about job titles, job duties, and even where someone worked. Besides, it’s already illegal to pay someone less for substantially similar work and saying that their prior employer paid them comparably is not a defense.

On the other hand, asking about past compensation helps employers assess how prior employers valued the applicant’s contribution, whether an applicant’s salary expectations are realistic, whether the compensation the employer is offering is competitive, whether the applicant’s skills are valued in the marketplace, and whether the applicant has been successful in his or her prior jobs.

Many of us were taught it was rude to ask someone what they made. But no one ever said it was criminal! We’ll offer recommendations for employers if the bill becomes law.

Update (October 5, 2015): The bill still hasn’t been signed. But a proponent of the measure has shown me that a violation of the statute would not be a misdemeanor. I apologize for the error.

Further Update (October 12, 2015): VETOED!