Senate Panel OKs Ban on Salary History Inquiries

A California Chamber of Commerce-opposed bill that seeks to stop employers from "seeking" salary history information about an applicant passed the Senate Labor and Industrial Relations Committee this week. The CalChamber opposes AB 168 (Eggman; D-Stockton) because it could expose all employers to unnecessary litigation, create hurdles in the hiring process and is already addressed by existing law.

Last year, the business community negotiated language on a similar proposal (AB 1676; Campos; D-San Jose; Chapter 856) to ensure that an employer could not base an applicant’s or employee’s compensation solely on prior salary. AB 1676 was signed and went into effect on January 1, 2017.

CalChamber and the large coalition opposing AB 168 believe the Legislature should allow the new law to have an impact before banning any inquiry into an applicant’s salary history.

There are several legitimate, nondiscriminatory reasons employers seek information about an applicant’s prior compensation. Employers do not necessarily have accurate wage information on what the current market is for all potential job positions.

In fact, employers in competitive industries do not advertise salaries in order to utilize their pay structure as a way in which to lure talented employees from competing firms. By requesting salary information, employers can adjust any unrealistic expectations or salary ranges to match the current market rate for the advertised job position. This practice has worked to the benefit of the applicant/employee.

Additionally, salary data can be utilized as a reference regarding whether the employee’s expectations of compensation far exceed what the employer can realistically offer.

Although AB 168 allows an employee to request a pay scale for the specific position, that mandate raises concerns as well. An employer may assume a pay scale accurately captures the current market for a specific position, yet could be wrong. Disclosing a pay scale could artificially limit an applicant’s interest in a position. Employers determine the appropriate wage and salary to pay an applicant based upon various factors, including skill, education and prior experience, as well as the funding available for the job.

Employers may feel compelled to enlarge the pay scale in order to create sufficient room to adjust that rate depending on the various factors and varied candidates for the job. Such a broad pay scale will not assist an applicant in negotiations.

Disclosure of wage rates or pay scales has not been proven to address gender pay equity. A Sacramento Bee article dated March 28, 2015, detailed findings that, despite disclosing actual compensation of all employees, women staffers in the California Legislature make less than male staff members.

In addition to last year’s AB 1676, the Labor Code was amended in 2015 by SB 358 (Jackson; D-Santa Barbara; Chapter 546) to mandate an employer provide equal wages for substantially similar work.

The CalChamber supported SB 358 after it was amended to clarify ambiguous standards, balancing the payment of equal wages for substantially similar work with maintaining an employer’s ability to control the workforce and pay higher wages for legitimate reasons other than gender.

Moreover, Labor Code Section 232 precludes an employer from preventing an employee from disclosing his or her wages.

The Fair Employment and Housing Act (FEHA) precludes any discrimination in the workplace based upon various protected classifications, including gender.

As a part of the Labor Code, AB 168 exposes employers to costly litigation under the Labor Code Private Attorneys General Act (PAGA) even when the employer pays an applicant equal wages as other employees.

For example, under AB 168, if an employer asks an employee about his or her prior salary, yet ultimately pays the applicant a higher salary than any of the applicant’s male colleagues, that employer still could be sued under PAGA for penalties and attorney’s fees.