The California Assembly this week passed a California Chamber of Commerce-opposed bill that could expose employers to costly litigation for inquiring into an applicant’s prior salary even when there is no harm.
AB 168 (Eggman; D-Stockton), which passed the Assembly by 60-9 vote, could penalize employers for failing to provide a pay scale upon demand, even though the employee has not suffered any harm or wage loss as a result of the violation. AB 168 could also expose employers to costly litigation under the Labor Code Private Attorneys General Act (PAGA).
In opposing AB 168, the CalChamber and a coalition of employers pointed out that the bill could create hurdles in the hiring process and existing law already addresses the issues contained in the bill.
Salary Data: Legitimate Uses
The CalChamber letter noted that employers seek information about an applicant’s prior compensation for several legitimate, nondiscriminatory reasons.
For example, employers do not necessarily have accurate wage information on the current market rates for all potential job positions. In fact, employers in competitive industries often do not advertise salaries, and such employers utilize their pay structure as a way to lure talented employees from their competition.
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 has worked to the benefit of applicants/employees.
In addition, salary data can be used as a reference regarding whether the employee’s expectations of compensation far exceed what the employer can realistically offer. It’s unnecessary to require both the applicant and employer to waste time on the interview process which, for highly compensated employees, could be lengthy, to ultimately learn at the end of the process that the employee would never consider taking the compensation offered.
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 the employer 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 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 equity pay.
The Legislature should allow this new law to have an impact before banning any inquiry into an applicant’s salary history.
In addition, Labor Code Section 1197.5 was amended by SB 358 (Jackson; D-Santa Barbara; Chapter 546) in 2015 to mandate an employer provide equal wages for substantially similar work. The Fair Employment and Housing Act also prohibits any discrimination in the workplace based upon various protected classifications, including gender.
Moreover, Labor Code Sections 232 and 1197.5 preclude an employer from preventing an employee from disclosing his or her wages.
Staff Contact: Jennifer Barrera