Democrats Ask Obama to Ban Contractors’ Salary History Questions

By Lisa Burden, J.D. Dec 15, 2016
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Several Democratic lawmakers have asked President Barack Obama to use his executive powers to prevent federal contractors from seeking salary histories from job applicants.

Fortune 500 companies such as Dell, IBM, General Electric, Lockheed Martin, Boeing, Raytheon and FedEx could be affected by such a presidential order.

The politicians said the executive action would help eliminate the wage gap that women and minorities often encounter, according to a news statement.

Congressional representatives Eleanor Holmes Norton, D-D.C., Rosa DeLauro, D-Conn., Jerrold Nadler, D-N.Y., and Jackie Speier, D-Calif., sent President Obama the letter on Nov. 29.

Executive actions are legally binding orders signed by the president that do not require congressional approval.

According to 2015 figures from the Bureau of Labor Statistics, on average, white women make 81 cents for each dollar that white men make. The difference is larger for men and women of color. Black men make 74 cents for each dollar that white men make, while Hispanic men make 69 cents. Black women make 67 cents, while Hispanic women make 62 cents.

"Even though employers may not intentionally discriminate against applicants or employees based on gender, race or ethnicity, setting wages based on salary history reinforces the wage gap.  Members of historically disadvantaged groups often start out their careers with unfair and artificially low wages compared to their white male counterparts, allowing any disparities to be compounded from job to job," the politicians said in the letter to the president.

Why a Ban?

Proponents say executive and legislative action is necessary to help bring about equal pay.

"We find that early on in their careers, if workers are underpaid, that underpayment creates a snowball effect," said Victoria Budson, the founder and executive director for the Harvard Women and Public Policy Program.

Budson explained that, if a worker is underpaid, he or she suffers the consequence of that underpayment in each subsequent hire when asked to provide salary history because past salary is used as a benchmark in offers of employment.

If Obama agrees to act, then this would be a significant intervention because of the number of federal contractors, Budson said.

In 2015, when the Congressional Budget Office was asked to provide the number of contractors employed by the federal government, it was reportedly unable to provide specific numbers but estimated that federal agencies spent over $500 billion for contracted products and services in 2012.

A list of federal contractors for 2015 available from the Federal Procurement Data System, which is part of the U.S. General Services Administration, includes such large organizations as Merck & Co., the Massachusetts Institute of Technology, Pfizer, ExxonMobil and others.

Executive action is needed at the federal level, the lawmakers said in the letter.

A Massachusetts bill—later made into law—forbidding employers from asking about salary history received support from the Boston Chamber of Commerce and the Associated Industries of Massachusetts, an advocacy group for employers, Budson noted.

The larger the business, Budson said, the more it understands that its ability to attract workers is an "incredibly important tool in ensuring profitability." She said that if all businesses are prevented from asking job applicants for prior salary history, then no company will be disadvantaged in the hiring process.

The U.S. Chamber of Commerce reportedly favors allowing employers to continue to seek prior pay information but did not return calls for comment on this article. The Massachusetts High Technology Council, which opposed the successful effort to ban the state's employers from seeking salary history and which denounced the bill in a press release as "duplicative and unworkable" did not return a call for comment.

Prior to the bill's passage into law, the council's executive vice president for public policy and communications Mark Gallagher wrote in a letter to state senators, "Senate Bill 2107 would make it exceedingly difficult and risky for employers to reward any employee, female or male, through commissions and other merit-based or performance-based compensation systems."

"The bill imposes on employers a very high burden of proof to establish that compensation differentials fit within narrow but undefined safe harbors which are open to subjective definition and interpretation. By elevating the level of risk associated with merit-based compensation systems, the law could actually discourage an employer from paying more to a [female] employee who is higher-performing than a male counterpart and vice versa," Gallagher wrote.

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More Due Diligence by Hiring Managers

Such laws can create more work for hiring managers.

Budson pointed out that not being able to ask for prior salary history means that the hiring officer has to have done the "due diligence and homework on what the role is worth to the organization."

She said that under the Massachusetts salary history law, which goes into effect in 2018, any business that does an internal audit and finds inequities is presumed to be solving the problem—an affirmative defense if a lawsuit is filed.

New York City's Law

While Massachusetts was the first state to pass a salary history law, New York City was the first municipality to put such a law in place. The law, which became effective on Dec. 4, bans Big Apple agencies from asking job applicants about wages, benefits or other compensation before a job offer with pay information is extended to the applicant.

Mayor Bill de Blasio created the mandate through an executive order.

Federal Bill

The same Capitol Hill lawmakers who asked President Obama to take executive action on the matter also have a bill pending on Capitol Hill to prevent all employers, not just federal contractors, from asking about salary history.

Norton introduced the "Pay Equity for All Act" (H.R. 6030), with DeLauro, Nadler and Speier, on Sept. 14. The bill prohibits employers from asking prospective or current employees for their salary history before making a job or salary offer.

A spokesman for Norton said further action on the bill isn't expected this session as Congress will soon adjourn for the holidays. He said Norton will re-introduce the bill during the upcoming congressional session that starts in January.

The spokesman, Benjamin Fritsch, said the National Women's Law Center, the National Partnership for Women & Families and the American Association of University Women support the bill.

Lisa Burden, J.D., is a legal reporter in Baltimore.

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