Salary History and Equal Pay Laws Clarified

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News of the Pay Privacy law prohibiting reliance on an applicant’s salary history in determining employment and pay hit the business world at the end of 2017 and went into effect in January 2018.  Since pay is a large factor in the hiring decision, the new law raised many questions among business owners who are especially concerned about complying with California employment laws.  Some of the common questions related to the salary history requirements and equal pay were:

Is it legal to ask an applicant about their desired salary or salary requirement?

Am I liable if an applicant voluntarily gives me their salary history or what they made a their last job?

If an applicant voluntarily discloses their salary history, can I take that information into consideration?

What about a current employee, I already know what they make, so can I take their salary into consideration to determine raises or pay for a new or different position?

The conflict between California labor and employment laws and the practical questions that business owners must ask and take into consideration in order to recruit and retain talented employees often cause business owners to feel overwhelmed and anxious.

The legislature must have heard many of these same questions because they recently amended California Labor Code Section 432.3 (pay privacy law) and 1197.5 (pay equity law) to provide some clarity for employers.  The amended versions of the two laws go into effect on January 1, 2019.

If you have been asking these or similar questions and want to ensure that you’re in compliance with the complicated and over-changing employment laws, we summarize the clarifications for you below.

Salary History Law Amendment (Labor Code Section 432.3)

Section 432.3 prohibits employers from asking about and relying on salary history in determining whether to offer employment to an applicant or deciding what salary to offer an applicant.

Learn more about Section 432.3.

AB 2282 amends California Labor Code Section 432.3 in an effort to clarify the statute in the following ways:

  1. Defines what “pay scale,” “reasonable request,” and “applicant” mean within the statute.
    1. “Pay scale” is defined as “a salary or hourly wage range.” A “reasonable request” for a pay scale, is a request that is made after an applicant has completed an initial interview with the employer. Since employers are required to provide the pay scale for a position upon reasonable request, having these definitions are very helpful
    2. “Applicant” is defined as an individual who is seeking employment with the employer and is not currently employed with that employer in any capacity or position. This helps clarify that employers are not prohibited from taking current employees’ pay into consideration when it comes to raises or determining pay for new positions.  However, employers must still be mindful of any unintended pay disparity that could result.
  2. The amended statute clarifies that although employers may not ask about or prompt applicants to disclose salary history information, employers may ask about salary expectations.
  3. As for voluntary disclosure of salary history, the amended statute clarifies that an employer may rely on and/or consider salary history when it is voluntarily disclosed.

As noted above, although the amendment answers many of the questions employers had about pay privacy requirements, employers must still consider the pay equity issue when determining pay.

Equal Pay Law Amendment (Labor Code Section 1197.5)

Section 1197.5 currently prohibits an employer from paying employees at rates less than those paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions, unless the employer demonstrates that one or more specific factors, reasonably applied, account for the entire wage differential. The same prohibition exists for pay disparity between employees of another race or ethnicity for substantially similar work. Prior salary, by itself, may not justify a pay differential.

The amendment would, however, allow an employer to make a compensation decision based on an employee’s current salary as long as any wage differential resulting from that compensation decision is justified by one or more specified factors, including a seniority system or a merit system.

If your business has not reviewed its hiring policies, procedures, and paperwork or conducted a pay audit, these additional clarifications to the laws will make it much easier to do so before the end of the year.

Contact me at (949) 529-0007 if you have questions about equal pay laws or employment laws in general. 

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In: Employment Law, New Laws, Uncategorized

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