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Wage & Hour Laws

Wage Discrimination: Why You Shouldn't Ask for a Candidate's Salary History

By Josh Young Oct 20, 2016

candidates salary history

More than 50 years ago, the United States government put in place the Equal Pay Act of 1963, which prohibits sex-based wage discrimination.

After evaluating data from the U.S. Bureau of Labor Statistics and U.S. Census Bureau, the American Association of University Women reported that women working full-time in the United States in 2015 earned 20 percent less than their male counterparts. On average, the male employee netted a salary of $51,212, while women took home a median salary of $40,742.

The study found that these disparities also cross racial lines with Asian males earning the highest ($60,897) and Hispanic or Latina females earning the lowest ($29,949) average annual incomes.

These pay differences can be caused by a number of factors, including the different career choices men and women make, the impact to the earner's career made by family obligations, and discriminatory payment practices.

Even when a business puts in place policies to prevent sex-based discrimination, unconscious bias can be a factor. Earlier this year, an insurance group agreed to pay out $4 million to roughly 300 female attorneys on its staff to settle a class-action pay discrimination lawsuit.

Prior to the suit, the business had in place a standardized compensation structure that assigned attorneys to six different salary grades based on the employee's experience and responsibilities. The firm had thought that this structure would encourage an objective salary policy.

According to the claimants, however, the business consistently placed female attorneys in lower salary grades than their male counterparts. These women also received fewer raises, promotions, and "high-profile" assignments.

Concerned how unconscious bias could be affecting your management and wage decisions? Learn how to avoid discrimination with our performance management training.

Shifting Legal Landscape

Hoping to address these inequities, the U.S. Congress is currently considering the Pay Equity for All Act of 2016, which was introduced by Rep. Eleanor Holmes Norton. The act, if passed, will prohibit employers -- under the threat of up to $10,000 in fines -- from requesting salary histories from either current or potential employees.

These lawmakers believe that when employers base salaries on an applicant's previous earnings rather than the expectations of the position, they run the risk of reinforcing the wage gap for workers who have already been potentially disadvantaged by discrimination.

And even if this particular bill doesn't pass, several states are already taking similar measures. In August, the Massachusetts state governor signed into law the Massachusetts Pay Equity Act, which prevents employers from asking salary-related questions of a hiring candidate until after a job offer has been made. Even then, employers in the state will only be able to verify these salary details if they have written permission from the applicant.

How Can You Prepare for the New Legislation?

Consider providing hiring managers or anyone involved with salary negotiations with updated training so that they are better prepared to navigate these new laws. You should also update your applications processes to remove any questions related to salary histories or prior compensation.

Reevaluate current wage plans, including how your company establishes starting pay for its employees and what factors drive salary increases or promotions. Develop guidelines that remove managers' discretion -- and their potential unconscious biases -- from compensation decisions.

If possible, bring in a labor statistician to audit your current salary structure and wage distributions. It is imperative that you understand what factors drive any pay disparities within your organization. After all, not all instances of inequity can be attributed to bias or discrimination.

The Next Step

With upcoming legislation an increasing likelihood, you need to fully understand your compensation policies if you want to protect your business. And you should take measures now to remove the hint of any impropriety from your salary policies.

To learn more about our wage & hour courses, you can fill out the form on the right to request a demo.

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