He Earned, She Earned: California Bill Would Limit Use of Salary Information

By June Bell August 29, 2016
He Earned, She Earned: California Bill Would Limit Use of Salary Information

A bill making its way through the California Legislature wouldn't prevent hiring managers from asking candidates about their current salary—but it would prohibit employers from using that information to justify a pay differential between men and women doing substantially similar work.

The legislation is a buttress to California's Fair Pay Act, which requires employers to show that any differences in pay between men and women are due to seniority, education, a merit system or other permissible factors. The Fair Pay Act, which took effect Jan. 1, is the toughest law of its kind in the country.

The pending legislation, AB 1676, must secure the Legislature's approval by Aug. 31. If Gov. Jerry Brown signs it by Sept. 30, it will take effect Jan. 1, 2017.

Massachusetts Makes a Move

Though California often leads the country in worker-friendly laws, a new Massachusetts law goes a step further on the issue of salary disclosure and gender-based pay disparity. Massachusetts' pay equity law, which becomes effective Jan. 1, 2018, bars employers from requiring job applicants to disclose their salary history.

Employers are also forbidden from requesting salaries from candidates' current or former employers. Businesses may verify that information only if the candidate has already been offered a new job and salary, and only if the employee provides written permission.

Other states looking to enact pay-equity legislation are likely to follow Massachusetts' model, which is "so streamlined" with "easy" language to appropriate, said Michael Kalt, government affairs director of the California State Council of the Society for Human Resource Management and a partner in the employment law practice group of Wilson Turner Kosmo of San Diego. California's Equal Pay Act is more complex, lengthier and broader, he said.

Last year, Brown vetoed a bill similar to the Massachusetts act. In his veto message, the governor explained his reasoning, saying, "Let's give [the Fair Pay Act] a chance to work before making further changes." Legislators have since toned down the language, and business groups—including the California Chamber of Commerce and SHRM—withdrew their opposition. Also, language that would have required employers to provide job applicants with the pay scale for a position was deleted.

"I wonder whether the authors of AB 1676 are kicking themselves for editing it," Kalt said, "because the Massachusetts bill does exactly what AB 1676 would have done in its original format."

A spokesman for Rep. Nora Campos (D-San Jose), who introduced the bill, said the compromise enabled the legislator to win bipartisan support and strengthen the Fair Pay Law.

Better for HR Managers

The pending version of the bill is far better for HR managers and employers because it's less restrictive than the original text, which "had the potential to waste time," Kalt said. "You couldn't really ask about what their salary was, and you may have had to go through rounds of [interviews] not knowing if this person would ever accept what you were considering offering."

Employers like to have as much information as possible on job applicants, and prior salary is a helpful data point when evaluating and comparing candidates, said David Conmy, principal owner of Zenzile Consulting in San Jose and president of the Bay Area Human Resource Executives Council. "It is human nature for people to go out and price-compare," he said, noting that salary history "is one component businesses look at to see if candidates are equally qualified."

Knowing a candidate's current salary can help a hiring manager weed out candidates who are unlikely to take the job. A business might prefer to hire a candidate who earns less than other applicants to save money, of course, Conmy said. The problem with that practice is it could perpetuate the gender-based salary gap. Supporters of the initial bill—and the Fair Pay Law—have sought to counter any gender disparity by eliminating disclosure of prior salary.

Working Proactively

Should AB 1676 become law, California businesses are unlikely see a spike in lawsuits by employees who claim their pay at former jobs was used to justify a pay rate lower than equally qualified colleagues of the other sex, Kalt said. He said California employers have been proactive in adjusting salaries to ensure compliance with the Fair Pay Law, reducing their vulnerability to claims of gender-based bias. Nonetheless, companies sued on those grounds must be able to show that factors other than salary history justified any alleged gender-based pay disparity.

Kalt encouraged HR professionals to continue to review workers' experience, education and compensation to ensure that employers are compensating everyone properly. "Make sure people are paid appropriately," he said. "Because if you don't, the legislature will do it for you."

June D. Bell, a regular contributor to SHRM, covers legal issues for a variety of publications. Contact her at june@junebell.com.

Editor's Note: The California Legislature passed A.B. 1676 on Aug. 29. It will be sent to the governor for signature or veto.



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