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Pay Equity Laws & Salary History Bans – Is Your Organization Prepared?

During the past several years, government officials at every level have been setting aggressive rules to ensure pay equity between men and women. Additionally, many states and cities have, or will soon, set strict salary history bans in the hopes of lessening gender bias. Not conforming to these laws can result in heavy penalties and compliance could require an investment in both time and dollars.

Is your organization prepared?

With the help of Hillary Massey, an Associate in the Labor & Employment practice of law firm Seyfarth Shaw, we’ve put together an overview of some notable pay equity and salary history ban rules, concentrating on those affecting NYC.

Pay equity updates

Federal and state laws already prohibit gender-based pay discrimination. On a federal level, the Equal Pay Act and Title VII of the Civil Rights Act of 1964 forbid employers from discriminating in pay and benefits based on sex. Additionally, most states have statutes that address pay discrimination by gender.

But in the past two years, groundbreaking changes have been made to equal pay laws as states attempt to close the pay gap between men and women.

Salary History Bans

The intent of the salary history ban legislation is to address the gender pay gap and ensure that lower compensation doesn’t follow women when changing jobs and compound over time. Several jurisdictions have enacted salary history bans, or will do so shortly, including those listed below. For this article, we’ll focus on NYC’s salary history ban.

  • Philadelphia (enjoined)
  • Puerto Rico (current)
  • New York City (10/2017)
  • Oregon (10/2017)
  • Delaware (12/2017)
  • California (1/2018)
  • Massachusetts (7/2018)
  • San Francisco (7/2018)

Basic Requirements of NYC’s Ban

  • It will be unlawful for an employer, employment agency or agency representative to question a candidate or former employer about the applicant’s salary history (wage, benefits or other comp), or to search publicly available records to uncover the information
  • If an applicant voluntarily discloses their salary history, the employer may rely on it or verify the information
  • Alternatively, employers, or their agents, may explicitly ask about salary expectations, including unvested equity or deferred compensation that a candidate would forfeit if resigning

Exceptions to NYC’s Ban

  • Action pursuant to a law that authorizes disclosure or verification of salary history
  • Employees transferring internally or being promoted
  • Other background checks
  • Public employees

Penalties in NYC

  • Up to $125K, or $250K per infringement if a willful, wanton or malicious violation is found; this applies to organizations and individuals acting on behalf of employers
  • Factors for penalties include: severity of violation, previous or subsequent abuses, employer size & revenue and the organization’s knowledge of the rules

What to Consider Now

  • How is your organization using salary history now?
  • How are you gathering and storing salary history?
  • Are your recruitment partners versed in the new laws and documentation rules?
  • Who in your organization should oversee best practices in relation to salary history bans? Human Resources? Legal? Finance?
  • Who in your organization needs to be trained on how to address salary requirements during interviews and hiring?
  • Do you need an external consultant to lead or assist with a wage audit or compensation equity plan?

Factors Explaining Wage Differentials in New York State

Where there is a wage differential among male and female employees performing equal work under similar working conditions, states may explain the difference by pointing to factors that vary by jurisdiction. Some of those factors in NY, include:

  • Seniority
  • Merit systems
  • Systems that measure earnings on quantity, quality or production
  • Factors other than gender, including location, education or experience

Pay equity legislation and salary history ban laws are complex and geographically diverse. Whether it’s your Human Resources or Legal teams that are leading the charge, it’s critically important for your organization to keep pace with the current, and upcoming, rules.

Resources:

50 State Pay Equity Desktop Reference: What Employers Need to Know About Pay Equity Laws, Seyfarth Shaw, 2017 edition

The New U.S. Pay Equity Laws: Answering the Biggest Questions, Seyfarth Shaw

Salary History Law: Frequently Asked Questions, City of NY Human Rights

Why Banning Questions About Salary History May Not Improve Pay Equity, Harvard Business Review, September 5, 2017

Photo Credit: Canva.com

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