Will Forbidding Questions About Salary History Help Close the Wage Gap?

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Should employers ask you about your salary history when interviewing you for a job? The growing trend says no, and many argue this question is unnecessary to find the perfect candidates for job openings.

City and state governments are contemplating this question in an effort to close the wage gap between male and female employees. Since 2017, there have been seventeen state-wide laws and twenty local ordinances across the country addressing this issue. Some of these prohibitions prevent only city or state government agencies from asking this question, while other prohibitions ban all employers in the state from inquiring about candidate’s salary history.

Philadelphia was one of the first cities to enact an ordinance to address this issue, and a decision by the Third Circuit upheld this ordinance on February 6. In 2017 and 2018 large cities such as San Francisco, Chicago, New York, and Philadelphia all enacted ordinances prohibiting asking about salary history. Other notable states that enacted a salary history prohibition include California, New York, Massachusetts, Alabama, Illinois, and North Carolina.

A few states, including Michigan and Wisconsin, passed laws prohibiting a salary history ban in their states. Wisconsin said the reasoning for the law disallowing a salary history prohibition was an effort to keep uniformity throughout the entire state. Contradicting Michigan’s law, Governor Gretchen Whitmer issued an Executive Directive one year after the law was passed forbidding state departments from asking or using any previously known salary history information until a conditional offer of employment is extended.

North Carolina enacted a state-wide law that went into effect on April 2, 2019. Governor Roy Cooper passed this Executive Order that state agencies may not request pay information from applicants nor rely upon previously obtained historical salary information when determining an applicant’s salary. Its’ purpose, similar to the other laws passed on this issue, was promoting pay equity between all employees. The Executive Order also rationalized that relying on salary history in a hiring process is one way to perpetuate gender pay inequities, because it assumes that all prior salaries are fair and free from bias.

North Carolina’s Executive Order has two components that are very common to the other laws and ordinances that are in effect. Those two components are (1) the “inquiry provision” and (2) the “reliance provision.” The “inquiry provision” protects the candidate during the interview process from being asked about the candidate’s wage history. In contrast, the “reliance provision” protects a candidate or current employee from relying on the wage history at any point in the process of salary or promotion discussions.

Background Regarding the Wage Gap

The United States Bureau of Labor Statistics releases research and information every year regarding women’s earnings. These statistics date back to 1979.  Their research showed that in 2018, women who were full-time wage and salary workers had median weekly earnings that were eighty-one percent of the earnings of male full-time workers. This has been standard since 2004, where the ratio has remained in the 80-83 percent range. This gap stays fairly constant throughout workers’ entire lives. The gap is the lowest for workers under the age of 35, where women earn 87-92 percent of what men did. In contrast, the gap is the highest for workers 35 and older,  with women’s earnings ranging from 75-80 percent of men’s earnings.

At this current rate of progress, the wage gap is not projected to close until 2093.

The wage gap does not only affect the women during their lifetimes. Having less earnings also means less retirement savings, and less money received from Social Security benefits.

The Argument Against a Salary History Ban 

Philadelphia was one of the first cities to enact an ordinance to address this issue. The Greater Philadelphia Chamber of Commerce filed suit against the City of Philadelphia regarding this ordinance, alleging that it is a violation the freedom of speech of the Chamber and its members. The Third Circuit decided on the case earlier this year, on February 6, in favor of Philadelphia and upheld the city ordinance.

In analyzing the speech at issue, the Third Circuit found that asking a job applicant about wage history does regulate speech because it prevents employers from asking potential applicants specific questions.  The speech falls under the category of commercial speech because it is “expressly related solely to the economic interests of the speaker and its audience.” Commercial speech requires immediate scrutiny, where the government has a substantial interest in the restriction, and the interest must be directly advanced by the law but is not more extensive than necessary to serve such an interest.

The Third Circuit found that the substantial government interest was in remedying wage discrimination and promoting equity, and this ordinance directly advanced such interest. The Third Circuit also found that the ordinance is narrowly tailored because it only prohibits employers from asking about a single topic while leaving a wide range of qualification questions relevant to performance or fit in the company open.

This case is one of the few examples that shows the argument against a ban on salary history questions in a job interview and how the applicable Circuit Court ruled on the issue. With competing First Amendment rights, the Third Circuit gave an example of how to weigh these interests and uphold the ordinance.

Should This Be a Federal Standard Under the Fair Labor and Standards Act?

Another argument that has been made to close the wage gap is a different interpretation of the Equal Pay Act of 1963 (EPA) in the Fair Labor and Standards Act (FLSA). The EPA prohibits employers from paying employees differently on the basis of sex, but contains four exceptions to this rule. The broadest exception is the last one, which allows differential payment based on “any other factor other than sex.”  The problem with the EPA exception is that courts have interpreted this exception as allowing salary history to be a factor in pay without violating EPA enforcement. A change in this interpretation could allow for a nation-wide ban with full effect. That ban would require uniformity from all employers across the United States without each state having to pass individual legislation.

Another alternative that would produce a nation-wide effect would be an act of Congress. The Paycheck Fairness Act sponsored by Rep. Rosa DeLauro and Sen. Patty Murray was proposed to the House of Representatives in January 30, 2019. This Act has several important provisions, but most significantly, it would prohibit employers from using salary history in payment and promotion discussions. The Act has currently passed the House of Representatives, and was received in the Senate on March 28, 2019. However, the Paycheck Fairness Act was first proposed in 1997 and been re-introduced into Congress many times. This slow movement in Congress suggests that states have taken matter into their own hands by passing their own laws while they wait for Congress to act.

State Action Will Likely Be The Best Way To Outlaw Discriminative Hiring Practices By Employers

A salary history ban protects employees and possible candidates from being asked about salary history in consideration for proper payment. While there are currently seventeen local ordinances and twenty state-wide bans, it is likely that this is a new trend that will keep growing among the states. With little being done for a nation-wide salary history ban, state action will likely be the most effective way to outlaw this behavior from employers.