California Salary History Law Tempers the Compensation Conversation

California Salary History BanCalifornia is one of 13 states to limit an employer’s investigation into and use of an applicant’s salary history information during the hiring process.  California’s salary history law first went into effect on January 1, 2018, as a measure to address the wage gap that persists between men and women.  California’s law prohibits employers from seeking any information about an applicant’s salary history or using an applicant’s salary history as a factor in determining whether to offer employment or what salary to offer.  The reasoning behind the law is that women, who are historically underpaid compared to their male counterparts, remain at a disadvantage when they carry their salary histories forward from job to job, perpetuating the cycle of wage disparity between the sexes.  The same can be said of wage disparities that adversely affect minorities.

Although prior salary is excluded from pre-employment consideration, the law contains two meaningful trade-offs.  The law gives applicants an added measure of protection by requiring a prospective employer provide an applicant, upon reasonable request, with the pay scale for the position.  The law gives employers permission to factor salary history into a compensation decision if the applicant has voluntarily disclosed without prompting their salary history information.

While the main condition of the law is clear, certain provisions of the original law were ambiguous, making compliance uncertain and salary negotiations problematic.  For example, it was unclear whether the law applied to current employees applying for a position and whether an employer could make a compensation decision about a current employee based on the employee’s current salary.  The law did not explain when an applicant could request the pay scale for position.  Further, the law was silent as whether an employer could ask about the applicant’s salary expectation for the position.

2019 Clarification

The law was amended effective January 1, 2019, to clarify these concerns.  Now, the law defines “pay scale” to mean salary or hourly wage range; “reasonable request” to mean after an applicant has completed the initial interview with the employer; and “applicant” to mean an individual who is not already employed by the employer.  The law clarifies that an employer is not prohibited from using a current employee’s existing salary in making a compensation decision as long as any sex/race/ethnicity wage differential resulting from a compensation decision is justified by one or more of the following factors : (1) a seniority system, (2) a merit system, (3) a system that measures quantity or quality of production, or (4) other bona fide factor such as education, training or experience.  In addition, the law now explains that an employer is not prohibited from asking about an applicant’s salary expectation for the position.

California’s salary history law, as amended, should provide employers with enough guidance to comply with the new restrictions on salary history inquiries and still make informed hiring decisions.  Prospective employees are also provided with tools to determine whether the pay range is enough to meet their needs.

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