What Does a Salary History Ban Mean for Employers and Employees?

By NJSBA Staff posted 20 days ago

Editor’s Note: The following article by Sarah Glockenmeier was published as part of the New Jersey Labor and Employment Law Quarterly Vol. 41, No. 1, which was distributed to members of the Labor and Employment Law Section. To learn more about joining a section of the New Jersey State Bar Association, email us at [email protected].

On July 25, 2019, New Jersey became the 17th state to issue a salary history ban that will prohibit employers in the state from seeking or relying on prospective employees’ salary history, including prior wages, salaries, or benefits, during the application process.1 Effective Jan. 1, 2020, this legislation bolsters the Diane B. Allen Equal Pay Act, which prohibits an employer from paying an employee of any protected class at a lower rate than other employees with similar job duties, unless the employer has a legitimate business reason for offering differing wages.2

Why are states banning salary history?
Wage gaps are prevalent throughout the workforce. According to research conducted by the Department of Labor Statistics in 2018, women earned 82% of what men earned as full-time wage and salary workers in 2017.3 Further, a study conducted by the Pew Research Center found that among full-time and part-time workers in the U.S. in 2015, black men and women earned just 75% as much as white men and women in median hourly earnings.4 The study also highlighted that women’s hourly earnings across all races and ethnicities are lower than those of white men and men in their own racial or ethnic group.5 However, the study found that the hourly earnings of Asian and white women are higher than those of black and Hispanic women and men.6 In short, despite efforts of equal pay, further steps need to be taken in order to reduce and eliminate the wage gap.

Although it is unlawful for employers to pay any employee of a protected class lower than other employees, factors, such as salary history, have inadvertently perpetuated lower income for protected classes. For instance, if employers continue to utilize salary history to set an employee’s new rate of pay, an employer may unintentionally perpetuate the pay gap where an employee was previously paid a lower wage than his or her coworkers. Restricting access to salary history, unless given voluntarily, eliminates the likelihood that such disparity would continue from employer to employer.

What is prohibited under the salary history ban?
New Jersey’s salary history ban prevents employers from utilizing wage, salary, and benefit history as a screening technique for job applicants.7 The salary history ban also prohibits employers from requiring applicants to disclose current or past salaries to satisfy any minimum or maximum criteria.8 Employers are further barred from soliciting salary information from an agent, former employer, or any other area in which salary history may be available, without voluntary disclosure.9 Furthermore, while applicants may share their salary history with employment agencies, these agencies are also barred from sharing this information with the employer without the applicant’s consent.10 If an employer violates any portion of the salary history ban, the employer shall be liable for a civil penalty of $1,000 for the first violation, $5,000 for the second violation, and $10,000 for each subsequent violation.11

What is permissible under the salary history ban?
Even though the new law bans salary history, employers can still ask applicants about their salary requirements or expectations for the job. Further, if an applicant voluntarily offers salary information, without being prompted, the employer can consider that information in setting the individual’s pay. Therefore, employers may identify and eliminate candidates with unrealistic expectations or unaffordable salary requirements. In addition, an employer may request that an applicant sign a written authorization to confirm salary history, including, but not limited to, the applicant’s compensation and benefits, but only after the employer makes an offer of employment and has fully informed the applicant of the overall compensation package.12

What changes should employers implement in light of the ban?
Attorneys advising employers should make their clients aware of the ban so that they can make the requisite internal changes. In order to avoid violating the ban, employers should notify hiring staff of the ban, train human resources employees on permissible hiring questions, and revise any job postings and applications that ask for salary history. Implementing these practices can lead to fewer violations and further the goal of the ban to reduce the wage gap.

Sarah Glockenmeier is an associate at Apruzzese, McDermott, Mastro & Murphy, P.C. in Liberty Corner.

1. P.L.2019, c.199.
2. P.L. 2018, c.9.
3. Highlights of Women’s Earnings in 2017: BLS Reports, U.S. Bureau of Labor Statistics (Aug. 1, 2018), www.bls.gov/opub/reports/womens-earnings/2017/home.htm.
4. Patten, Eileen, Racial, Gender Wage Gaps Persist in U.S. despite Some Progress, Pew Research Center
(July 1, 2016), www.pewresearch.org/fact-tank/2016/07/01/racial-gender-wage-gaps-persist-in-u-sdespite-some-progress/.
5. Id.
7. P.L.2019, c.199.
8. Id.
9. Id.
10. Id.
11. Id. These fines are collectible by the Commissioner of Labor and Workforce Development in
a summary proceeding pursuant to the “Penalty Enforcement Law of 1999,” P.L.1999, c.274
(C.2A:58-10 et seq.).
12. P.L.2019, c.199.