What You Need to Know About NYC’s Salary History Ban

Should your earnings history play a role in informing future job offers? You could say it’s not a very meaningful metric. No more relevant than the original purchase price of a home driving the sales price. Demand, inventory and the selling prices of comparable homes are much more powerful variables.

Even so, most of our clients request salary data on our candidates. The same way prospective homebuyers are curious about what the sellers bought the home for, even if market conditions are vastly different now. It scratches the itch of “Am I paying more than I should?”

But in 150 days, this could all go away. On May 4th, NYC Mayor Bill de Blasio signed a law banning prior salary questions in hiring in hopes of helping close the wage gap between men, women and minorities. It’s slated to take effect October 31, 2017. Massachusetts Governor Charlie Baker signed a similar law set to become effective in 2018. Philadelphia’s salary history law is currently being challenged and San Francisco is contemplating passing their own version in the near future.

What is this law and how will it achieve its goal?

This new legislation is aimed at solving the stubborn and long-standing problem of unequal pay. Since the late 1960s, groups like the National Organization for Women (NOW) have been fighting for “Equal Pay for Equal Work”. In fifty years, we’ve made some progress but are still far from equal. This is what salary inequity looks like today.

salary inequality

Simply stated, the law says an employer cannot ask prospective employees to divulge salary history, unless they voluntarily agree to provide such information. Nor can employers search public records or speak to previous employers to obtain this data. The idea is that if women and minorities have been historically underpaid, then basing future earnings on previous salary promotes the wage gap. As Public Advocate Letitia James, who introduced the NYC bill in August, stated, “Being underpaid once should not condemn one to a lifetime of inequity.”  Furthermore, employees can’t discuss their salaries with other employees in the workplace, a practice some employers currently ban.

Although such laws may differ between various cities and states, the basic implementation will require employers to re-write their employment applications, define “comparable work”, revise any policies that ban salary discussion and train hiring managers and human resources professionals to comply with the new law. Employees can file complaints to the appropriate city or state agency if they feel such laws are being violated and are entitled to compensation and legal fees should they win the case.

Who favors this law and who opposes it?

Human rights groups, feminists and minorities are the most obvious supporters of this legislation. Also, it has garnered some bipartisan political support as can be seen by the laws signed by Democrat Bill de Blasio and Republican Charlie Baker. Some employers had already voluntarily stopped asking salary history questions, saying it was a poor metric from the get-go.

But there is also strong opposition. The Chamber of Commerce for Greater Philadelphia is suing the City of Philadelphia and city’s Commission on Human Relations arguing that the law violates the First and Fourteenth Amendments and the Commerce Clause of the U.S. Constitution along with certain Pennsylvania state laws. The gist of their argument is that it limits the employers’ ability to gain necessary information and suggests that it doesn’t have the power to enforce such laws on national corporations operating in Philadelphia.

Aside from the legalistic arguments, the main idea is that these laws are cumbersome and costly to businesses and are unfair to employees who were hired when previous salary information was required.  Despite their intent, they also may have a negligible effect on earnings equality.

Where does that leave us?

Salary history is just one metric that employers and recruiters use to craft job offers. In the absence of this data, we’ll need to become more rigorous about the other inputs, like what current employees in the same role are paid and market rate for similar roles and experience. If a candidate’s salary request is outside that range, then we must decide if an exception is merited. It’s tricky in a tight talent market. If the new law and market conditions lead to higher salaries for new employees compared to existing employees in the same roles, then we’re facing a retention problem.

I’m sure we’ll find a way to navigate this new terrain in a way that recognizes everyone’s interests. I spoke to several colleagues to inform my perspective and look forward to more dialogue as we come closer to the law’s effective date.

Would love to hear your take.

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