Does your company ask about salary history during the application and hiring process? If so, you may want to re-think that approach.
Nationwide, women earn about 85% of men’s wages, and Kansas is no exception. In an effort to help reduce the gender pay bias, a growing number of states and cities have banned employers from inquiring about salary history during hiring. The rationale behind these bans is that, when salary offers are based on salary history, women who have been previously underpaid will continue to be underpaid. Thus, salary history inquiry bans aim to stop the cycle of underpaying women.
Salary history inquiry bans have been adopted from coast to coast—from California to New York City—and now, Kansas City, Missouri, has joined their ranks. Effective October 2019, the Kansas City ordinance generally prohibits an employer with six or more employees from engaging in certain hiring practices, including: (1) inquiring about a job applicant’s salary history; (2) searching public records to obtain salary history; (3) relying on salary history to make hiring decisions; and (4) retaliating against an applicant for failing to disclose salary history. These prohibitions do not apply to applicants for internal transfers or promotions with their current employer, and employers are permitted to discuss salary expectations with applicants.
If your company operates in Kansas City, Missouri, or other locations with salary history inquiry bans, you obviously need to update your hiring procedures accordingly, or risk liability and penalties down the road.
But even if an employer is not subject to a state or local ban, there is still good reason to stop asking job applicants about salary history. The Equal Pay Act prohibits pay discrimination between male and female employees who perform substantially equal work, unless the disparity can be justified by certain legitimate, non-discriminatory factors.
Recently, some courts have ruled that salary history cannot justify a pay disparity under the EPA because prior wages may reflect historical pay discrimination. In other words, the “market value” argument—that employers must pay men more than women to lure from their prior jobs and keep them at their current jobs—is not a defense to an EPA discrimination claim. As one court put it, “The argument that supply and demand dictates that women qua women may be paid less is exactly the kind of evil that the [EPA] was designed to eliminate.”
The bottom line is, employers need to know if they are subject to salary inquiry bans, and, even if they’re not, they should ask themselves whether there’s any legitimate reason to ask applicants about their salary history. Employers should also regularly review their pay practices and ensure that there are legitimate nondiscriminatory reasons for any pay disparities between employees of different genders and races who are performing the same work. Such internal pay audits should be conducted in conjunction with legal counsel experienced in this area so that the analysis is conducted correctly (including regression analysis based on non-discriminatory factors affecting pay) and is subject to the attorney-client privilege, and that any potential problems are properly addressed.