San Francisco Bans Salary History Questions

San Francisco became the latest city to ban employers from asking job applicants about their salary histories when Mayor Ed Lee signed the Parity in Pay Ordinance on July 19. The new law will take effect for employers in July 2018 (and penalties for violations may be imposed beginning in July 2019).

The ordinance will have a broad reach, said Kimberly Chase, an attorney with Haynes and Boone in Orange County. The law will apply to all employers, including city contractors and subcontractors. It will also apply to all job applicants in the city—even those applying for temporary, contingent, seasonal or part-time work.

The purpose of the law is to combat gender-based pay inequities that continue over the course of a woman's career. "The problematic practices of seeking salary history from job applicants and relying on their current or past salaries to set employees' pay rates contribute to the gender wage gap by perpetuating wage inequalities across the occupational spectrum," the ordinance states.

Women in San Francisco are paid about 84 cents for every dollar men are paid, and women of color earn even less (black women are paid 60 cents and Latinas are paid 55 cents for every dollar paid to men), according to the law.

"This ... ordinance is part of a surge of efforts among cities and states across the country in recent months and years to address the pay gap that affects women and minorities," said Seth Neulight, an attorney with Nixon Peabody in San Francisco.

More cities are considering this type of law, and some have already passed similar ordinances. New York City's law will take effect on Oct. 31. Philadelphia's ordinance was supposed to take effect in May but was postponed while a judge considers a legal challenge to the rule.

Some states have also passed pay-inquiry bans. Delaware's law is scheduled to take effect in December. Massachusetts' law is slated for 2018, and Oregon's will be effective in 2019.

"Many employers still feel a need to request salary information from job applicants to gain an understanding of the market," said Sarah Hamilton, an attorney with Constangy, Brooks, Smith & Prophete in San Francisco. So employers that have a legitimate need for this market information should come up with another strategy to obtain it, she said.

[SHRM members-only how-to guide: How to Establish Salary Ranges]

Hamilton noted that other cities in California may be waiting to see what happens in San Francisco before following suit. "This is just the tip of the iceberg, so employers should try their best to stay ahead of the changing landscape," she said.

The Details

San Francisco's pay question ban will prohibit employers from:

• Asking about a job applicant's current or prior salaries.
  
• Relying on an applicant's salary history in determining whether to make a job offer or what salary to offer.
  
• Retaliating against an applicant for refusing to disclose salary history.
  
• Releasing a current or former employee's salary history without written authorization—unless disclosure is required by law or the information is publicly available or part of a collective bargaining agreement.
  

However, an employer may consider a job applicant's salary history if it is disclosed voluntarily and without prompting from the employer.

This will allow job applicants to freely negotiate or present counteroffers during the selection process, Chase noted.

Neulight said employers can also discuss an applicant's salary expectations, but HR professionals need to be mindful of the boundaries and train hiring managers accordingly. If a hiring manager asks about expectations but does so in a way that is intended to solicit salary history information or put pressure on a candidate to disclose such information, that will pose a problem, he said.

Prior to the compliance date for employers, businesses will need to post a notice to employees, Hamilton said. She said the city's Office of Labor Standards Enforcement (OLSE) wll provide more details about the notice and posting requirement. She also expects that the OLSE will issue more compliance FAQs before July 2018.

Statewide Considerations

"It's worth noting that it's possible that a similar pay parity law will be passed statewide in California," Chase said. A.B. 168 would prohibit employers in the state from seeking salary history information from job applicants—but it's too early to tell if that bill will become law, she added.

Still, employers in California should note that state law already places some limits on what employees can do with salary information. California law prohibits employers from paying workers of one sex less than workers of the opposite sex or of one race or ethnicity less than another for substantially similar work.

Although the Fair Pay Act doesn't prohibit salary history inquiries, it does say that prior salary alone can't justify a pay disparity—there have to be other considerations, such as seniority or education.

HR's Role

What should HR professionals be doing in jurisdictions where salary-inquiry bans have passed? Employment attorneys told SHRM Online that HR can prepare by:

• Removing salary questions from any hiring forms, such as job applications, candidate questionnaires and background check forms.
  
• Updating interviewing and negotiating policies and procedures.
  
• Training hiring managers and interviewers on the new provisions.
  

Managers need to be particularly aware that this law has an oral component and would apply to their conversations with applicants, Chase said.

Employers that don't comply with San Francisco's ordinance will be subject to a monetary penalty on a per-employee basis, Hamilton noted. So the risk could be significant, particularly for large employers that interview a lot of job applicants.

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