SALARY HISTORY IS NO LONGER A FACTOR FOR HIRING IN CALIFORNIA

New Law Also Requires Special Caution When Applicant Volunteers Such Info

Effective January 1, 2018,  new Labor Code section 432.3 will prohibit all California employers from relying on salary history information as a factor in offering an applicant employment or in what salary to offer.

Section 432.3 will also bar employers “orally or in writing, personally or through an agent,” from seeking “salary history information, including compensation and benefits, about an applicant for employment.”

The new provision requires an employer to disclose its pay scale on request of an applicant.

While the first portion of the law clearly states that salary history cannot be a factor in what salary level an employer may offer an applicant, a later section appears to provide an exception. If a prospective employee, “voluntarily and without being prompted,” provides salary information, then the employer may consider or rely upon that information in determining that person’s pay level. Section 432.3(h).

If and when an applicant discloses such information, it creates at least three potential pitfalls for employers, all of which should be addressed with adequate and accurate documentation.

First, an employer should document that any such applicant disclosure of past compensation was made “voluntarily and without prompting.”

Second, if employer is to consider or rely on that prior salary information to determine the person’s pay level, the company must take care to document that it is not violating the prohibition of Labor Code 1197.5 against wage disparity between men and women for  substantially similar work under similar working conditions. See also, Understanding California’s Equal Pay Act, (June, 2011).

Third, since an employer may not use salary history in determining whether to hire a person, a company should be particularly careful in documenting why it legitimately declined to employ someone (e.g., not the most qualified candidate) after that applicant has voluntary disclosed past compensation levels.

Before this law goes into effect in January, California employers should eliminate any application form, policy or procedure that would run afoul of these new rules as well as train personnel management staff how to comply, including the sorts of adequate documentation a company should maintain to confirm such compliance. Employers should also create a “pay scale” for each position for which they are interviewing in case someone asks for it.

For additional information, please contact attorneys Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin
October 20, 2017