California Becomes Latest US State to Introduce New Law to Tackle Pay Inequalities

— 25 October 2017

 

Governor Jerry Brown signed the new state-wide salary privacy bill, adding Section 432.3 to the Labor Code, relating to employers (A.B. 168), which will take effect from January 1st 2018.

 

Employers routinely ask applicants about their salary history during the hiring process, but this is soon to be prohibited in the state of California.  This is largely due to concerns that employers heavily rely on this information when considering offers of employment, and thus perpetuates the existing pay inequalities.

The bill will preclude employers from, “orally or in writing, personally or through an agent,” from asking about an applicant’s prior salary. However, if the applicant “voluntarily and without prompting” provides this information, the employer can use it “in determining the salary for that applicant.”

 


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1.

Section 432.3 is added to the Labor Code, to read:

(a) An employer shall not rely on the salary history information of an applicant for employment as a factor in determining whether to offer employment to an applicant or what salary to offer an applicant.

(b) An employer shall not, orally or in writing, personally or through an agent, seek salary history information, including compensation and benefits, about an applicant for employment.

(c) An employer, upon reasonable request, shall provide the pay scale for a position to an applicant applying for employment.

(d) Section 433 does not apply to this section.

(e) This section shall not apply to salary history information disclosable to the public pursuant to federal or state law, including the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code) or the federal Freedom of Information Act (Section 552 of Title 5 of the United States Code).

(f) This section applies to all employers, including state and local government employers and the Legislature.

(g) Nothing in this section shall prohibit an applicant from voluntarily and without prompting disclosing salary history information to a prospective employer.

(h) If an applicant voluntarily and without prompting discloses salary history information to a prospective employer, nothing in this section shall prohibit that employer from considering or relying on that voluntarily disclosed salary history information in determining the salary for that applicant.

(i) Consistent with Section 1197.5, nothing in this section shall be construed to allow prior salary, by itself, to justify any disparity in compensation.


 

“This has always been a difficult one for us as to some extent the candidates exiting salary is irrelevant. Firstly they may be severely underpaid in their current job, which may be a reason for their interest in moving. Secondly, the hiring companies should have a salary band in mind for the position they are offering. What really matters is what the candidate can do for the hiring firm and what that would be worth to them. So what is more relevant is asking the candidate what he or she is seeking to accept the job. Offering candidates a small increase in their previous salary rather than the market rate may reduce the company’s payroll costs but will perpetuate salary differentials and may encourage employees to be tempted away by headhunters (!) at some time in the near future. If the differential between what the candidate is expecting and what the employer is offering is able to be bridged then all is good. If not the process can be quickly terminated.” Peter Hannaford, Datacenter People Founder and Chairman

 

We have seen similar action taken by other states, territories, and municipalities including Delaware, Oregon, Puerto Rico and San Francisco, and it is increasing likely that the trend will continue.

If you are recruiting in any of these territories, you will need to discuss these changes with your hiring managers, HR and recruitment agencies to amend your processes.

 

About Datacenter People

Founded in 2010 by data center veteran Peter Hannaford, Datacenter People is a specialist headhunting firm helping businesses at every stage in their development to identify and engage hard to find data center professionals, both temporary and permanent, around the globe.

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