Employers beware: Wage-history questions are out of the question.
A new wage equity law that affects employers and workers alike will soon take effect in New Jersey. The law forbids employers from screening job applicants based on the applicant’s prior salary history, which includes prior wages, salary and benefits.
The bill has been hailed as a substantial victory for the advancement of gender pay equity. According to women’s advocacy groups, using past wages as a base for salary offers is a key reason why sizeable pay gaps still endure today. As New Jersey State Senator Loretta Weinberg explained in a recent New York Times article, “[t]he new laws are designed to protect job seekers . . . from receiving starting salaries that are tied to low past salaries. This is mostly aimed at women[.] The idea is that if a woman is paid less from the get-go, and then limited by her past salary at each subsequent job, it may be impossible for her to catch up.” It is thus argued that, as a result of the ban, potential employers and job candidates will negotiate salaries focused specifically on qualifications and the requirements for the job set to a salary as opposed to other, more nefarious considerations.
If employers fail to comply, the new law provides for a private right of action. Furthermore, employers will face civil penalties in the range of $1,000 for a first offense, $2,000 for a second offense, and $10,000 for all subsequent offenses. Nonetheless, proving a violation may be difficult because the law does not explicitly define what conduct would be deemed a single violation for purposes of determining penalties.
While the new law provides great protections to potential employees, it also includes express examples of acceptable actions by employers and exceptions from coverage in specific areas. First, if an employer has a multistate job application that includes operations in other states, the employer can ask a salary-history question with a disclaimer that an applicant for a position located in New Jersey is instructed not to answer. Second, if an applicant voluntarily provides information pertaining to his or her salary history, an employer may verify the validity of the information provided and may use that information in setting an applicant’s compensation. Third, the law does not apply to internal transfers or promotions within an organization. Fourth, an employer can discuss the “terms and conditions” of incentive and compensation plans that the applicant was previously subject to; however, the employer cannot ask about the specific dollar amount involved in the plans.
New Jersey is far from the first place in the United States to pass legislation of this kind. Similar bills have been signed in recent years in places like Illinois, Massachusetts, New York, and Pennsylvania. Recently, in Philadelphia, a local wage equity law faced instant criticism from large companies and the City’s Chamber of Commerce, who argued that the law created an anti-business environment within the City and that it was a violation of their First Amendment commercial speech rights. A lawsuit was eventually filed against this City on these grounds and that matter is currently before the Third Circuit Court of Appeals. Undoubted, a ruling declaring Philadelphia’s wage equity law unconstitutional would have a significant impact on New Jersey’s implementation of the bill.
New Jersey’s law does not go into effect until January 2020. In the meantime, New Jersey employers should thoroughly assess the substance of their job applications, interview guidelines and templates, and recruiter instructions to ensure compliance with the law. Moreover, multistate employers should conduct surveys of each state and municipality where they operate to determine the scope and applicability of local wage-disparity laws.