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Despite a recent decision by the Ninth Circuit, California employers may soon be legally prohibited from asking about an applicant’s salary history during the hiring process. In their decision, the Ninth Circuit said that employers could consider an applicant’s prior earning history “as long as they applied is reasonably and had a business policy” to justify it. This decision comes on the heels of the passing of the California Equal Pay Act, which became effective in January. The law does not explicitly state that employers cannot ask about an applicant’s salary history during the hiring process. However, many believe that knowing an applicant’s salary history is problematic in combating the gender wage gap.

California Following the Footsteps of Recent Trend to Ban Salary History

California lawmakers wasted no time in passing a bill in the state Assembly which directly prohibits private employers from asking about salary history during the hiring process. The measure, which passed the Assembly by a vote of 56-8, is similar to other pieces of law that have begun to pop up across the nation. Massachusetts, Philadelphia, Washington, D.C, and New York City have all successfully passed similar laws. The California bill, which recently passed the state Senate’s Labor and Industrial Relations Committee by a vote of 4-1, aims to encourage employers to compensate their employees based on the work they do in the current market, rather than the work they have done elsewhere.

History of Unbalanced Earnings May Thwart Efforts to Close Wage Gap

Lawmakers and proponents of closing the wage gap believe that asking about a candidate’s salary history negatively impacts female workers. A study by the Bureau of Labor Statistics in 2015 found that a woman who was employed full-time earned an average of $775 per week. A man working a full-time job earned an average of $914 per week. This amounted to a $7,000 disparity between the salaries of full-time male and female employees over the course of a year.

Studies have found that women tend to earn less than men from the very beginning. Regardless of demographics, occupation, hours on the job, or geographic location,  it has been shown that women earn 6.6% less than men in a first job. When women try to move up the ladder in the workplace and are required to disclose their history of earnings, they may face greater hurdles in seeing meaningful and appropriate increases in their incomes. A male applicant may seem more qualified for a position if he has a history of earning a higher wage. Earning a higher wage in a previous position could be associated with a heightened level of trust or maturity, refined job skills, or even increased ability to perform job responsibilities.

Women may be at a disadvantage early on in the hiring process if an employer (even subconsciously) ranks a male applicant higher on the list of potential employees because his salary history is more substantial. The bill, which is currently before the California state Senate, aims to target these implicit biases and remove them from the equation. The law, if passed, could be a step in the right direction for closing the wage gap.

 Opposition to Salary History Bans

There are groups who are not interested in banning salary history from consideration for employment. These groups, especially those in states where salary history bans have gained traction in the legislature, have called these laws “counterproductive,” “misguided,” and a gateway for “unbridled litigation.” They base their claims on the fact that there is no evidence to support the idea that the law works nor is there evidence sufficient to prove that an employer who considers salary history is more likely to continue the salary discrimination. However, it is difficult to have evidence for how these laws work since they are brand new. It will take time to see how they affect the wage gap and hiring processes.

Most responses to opposition to salary history bans rely on the fact that no matter which way you slice it, women continue to earn less than men. The executive director of Harvard University’s Women and Public Policy Program explains that “What we know is when women…get hired, people are more likely to underpay them. And when you peg your offer and salary based on what someone’s made in their last employment, you then replicate whatever discrimination people have faced in prior jobs.” In other words, when we rely on the past earnings of applicants, history is destined to repeat itself. This salary history legislation could be instrumental in changing the way applicants are evaluated during the hiring process.

 Could a Salary History Ban Lead to Further Wage Gap Disparity? 

If employers do not have information about applicants’ salary histories, could they still contribute to the wage gap disparity? It is possible but unlikely under the new California law. In addition to prohibiting private employers from asking about salary history, the law would require these employers to disclose a salary range for open positions. Under the law, applicants could petition the private employer to disclose the salary they pay or will pay for the position.

Forcing employers to solidify a salary range – and to disclose that information – requires them (a) to do their homework about their ability to pay employees and (b) evaluate applicants based on merit, rather than past or anticipated earnings. If all employees –male and female – are required to be compensated within this range they disclose, the potential for a significant disparity in earnings between genders is much less. Rather than relying on salary history to form a pay range, employers would essentially be required to take a good, hard look at the numbers, determine what they can really pay employees for a specific position, and then follow-through on a more equitable basis.

Keeping an Eye on the Pending Salary History Legislation

The Ninth Circuit decision does not directly say that employers can rely solely on an applicant’s salary history when making employment decisions. Rather, the court said that an employer could consider salary history if they had a legitimate business reason for doing so. The new bill takes this a step further and entirely removes the factor from the employer’s arsenal. Is this the best way to fight the gender wage gap? Time will tell.

In the meantime, it will be important for female employees to remain aware and alert of blatant and unjustifiable wage differences in the workplace. If you believe that you may be a victim of the wage gap disparity you should speak with an experienced employment law attorney. An attorney can review your case, determine whether you may have a valid argument, and help you negotiate the wage you rightfully deserve. Contact our office today for a free consultation.