Now Illegal Wage History

Many job applicants try to evade questions about their salary history during the salary negotiation process. But now it is illegal to ask for salary history in New Jersey and Philadelphia. The two jurisdictions join a larger trend of 18 state and 20 local governments taking aim at ending the disparity in the compensation of women and minorities.

 

New Jersey

The new law for New Jersey prohibits employers from requesting or relying upon a candidate’s salary history—including prior wages, salaries, or benefits—as part of the hiring process. New Jersey employers may not screen job applicants based on wages, salaries, or benefits or require a minimum or maximum salary history criteria. Employers are further banned from considering a candidate’s refusal to voluntarily provide salary history when making hiring decisions.

If the candidate does voluntarily disclose salary history information, without any coercion or prompting from the prospective employer, then the employer may verify it and consider it when making compensation decisions for that candidate. After an employer makes an offer of employment that includes an explanation of the overall compensation package, then the employer may request that the applicant provide a written authorization to confirm pay history.

The law does not apply to internal transfers or promotions. There is a carveout for employees subject to collective bargaining agreements, and the law also does not trump any federal law or regulation that requires the disclosure of an applicant’s salary history.

Employers with operations in New Jersey can face fines under the new law: it provides that civil penalties are not to exceed $1,000 for the first violation, $5,000 for a second violation, and $10,000 for each subsequent violation.

 

Philadelphia

In Philadelphia, a recent federal court of appeals decision determined that employers cannot ask job applicants about their salary history or rely upon such information in setting new salaries. The wage equity ordinance prohibits Philadelphia employers from inquiring about a prospect’s wage history, requiring the disclosure of wage history, conditioning employment or an interview on disclosure of salary history, retaliating against a prospective employee for failing to provide wage history, or relying on wage history in determining wages unless the prospective employee “knowingly and willingly” made such a disclosure. The Chamber of Commerce for Greater Philadelphia had challenged the ordinance, arguing it would violate the free speech rights of businesses, but the Third Circuit concluded that the free speech limitation was outweighed by the goal of pay equity.

 

What Should Employers Do?

Employers in New Jersey and Philadelphia should act immediately to review their hiring processes as outlined below.

  • Review employment applications, forms, and interview guidelines to ensure they do not impermissibly ask about, or rely upon, salary history information.
  • Amend any job applications or new hire information packages to remove any inquiry into prior salary history.
  • Train current staff and employees who are involved in the hiring process about the new ban on salary history information. Review the types of questions that are permissible and impermissible under the new laws. Consider inquiring about a candidate’s salary expectations, rather than salary history.
  • Consider providing a salary range in job postings.
  • Review instructions to background check vendors to ensure that they do not inquire about salary history.
  • Document any voluntary disclosures made by a job applicant concerning their salary history.

For more tips on improving your compliance with state and local labor laws, visit our Labor Law Updates page.