Last month, New York City Mayor Bill de Blasio signed Intro. 1253, a law prohibiting all employers from inquiring about or relying upon the salary history of a job applicant to determine the salary they will be offered during the hiring process, including the negotiation of a contract. Proponents of the legislation say that Intro 1253, sponsored by Public Advocate Letitia James, is a groundbreaking achievement in the fight for pay equity.
From cities like New York City and New Orleans to states like Massachusetts, similar laws are popping up all over the country. Employment law experts expect the momentum to continue, with other states and cities to follow suit with their own legislation banning conversations about salary history during the hiring process. Advocates applaud the move, believing that leaving salary history out of discussions might help undo some of the pay inequity of the past and will help – finally – to bring all salaries up to the same level.
“A woman in New York State working full time makes about 87 cents for every dollar a man earns, or a difference of $6,778 in median annual income,” James wrote in an April 2016 policy report analyzing the gender wage gap in New York City’s workforce. “Altogether, women in New York State earn about $19.6 billion in wages less than men each year. The gender wage gap not only affects women but all members of their communities, including the men, children, and families who depend on the important economic contributions of women.”
Back in May, Mayor de Blasio took it one step further, suggesting that all minorities – not just women – could benefit from the law,
“It is unacceptable that we’re still fighting for equal pay for equal work. The simple fact is that women and people of color are frequently paid less for the same work as their white, male counterparts. This Administration has taken bold steps to combat the forces of inequality that hold people back, and this bill builds upon the progress we have made to close the pay gap and ensure everyone is treated with the respect they deserve.”
But critics believe that not only will the legislation not solve this pervasive problem, it may actually cause others, including undermining workers’ ability to negotiate and perpetuating stereotypes about women and minorities.
Employment lawyer Dan Eaton, a partner with the San Diego law firm of Seltzer Caplan McMahon Vitek, doesn’t agree with de Blasio. Eaton, whose practice focuses on defending and advising employers, believes that salary history is a relevant consideration in the employment process and one that employers should be allowed to weigh.
“Salary history is relevant in determining the appropriate market clearing price for an employee,” he said. “Put less clinically, salary history is germane to determining the right salary for a particular applicant.”
Eaton believes that enhancements to California’s Equal Pay Act, which requires equal pay for employees who perform “substantially similar work, when viewed as a composite of skill, effort, and responsibility,” may unintentionally harm jobseekers. An addition to the law that took effect in January 2017 prohibits employers from justifying salary differences on prior salary alone. A further effort has been made to prohibit employers from asking about salary history altogether. If ultimately enacted into law, this revision, Eaton feels, may unjustly tie the hands of jobseekers who are willing to negotiate.
“I am familiar with the arguments for this legislation,” he said. “My response is that salary history should never be the sole factor in determining initial salary determinations. But I think think that the idea that [salary history] isn’t relevant at all doesn’t reflect a fair consideration of the market forces driving salaries.”
A ban on asking about salary history went into effect in Puerto Rico in March, causing recruiters there to make slight adjustments in the questions they ask during the screening and interview process. Some recruiters there wonder if the new law will make the recruiting process more labor intensive.
According to Rose Dougherty, senior recruiter at BOLD, which has offices in Puerto Rico, Equal Pay legislation there has changed the conversation recruiters can have about salary. Whereas before, recruiters would ask what a candidate was currently earning, now, she said, they can only ask what they hope to make in their next role.
“We are going to have to look even more closely than we already do at applicants’ skill sets and their years of experience to determine who is most likely to fit into the salary range we’ve established for a role,” she said. “At the moment, BOLD does not publish salary ranges, but it’s something we may consider doing in the future to prevent our staff from wasting time interviewing candidates whose salary expectations are out of line with what we’re able to offer.”
With or without legislation, some in the private sector have voluntarily waded into these waters in an attempt to even out salary disparities. One example is a 2015 Reddit policy change. While serving as interim CEO, Ellen Pao eliminated salary negotiations from the company’s hiring process at Reddit. She believed that offering all employees non-negotiable starting salaries at the high-end of the pay range for the role would level the playing field between men and women, who have a tendency to negotiate less often and less successfully than men.
There are several studies that support Pao’s assertion that women often lose in the negotiation game. In 2007, one group of researchers found that women are less likely than men to negotiate salaries at all, while a separate study found that women who did initiate negotiations were more likely to be penalized for doing so than men. Non-negotiable salaries, Pao argued, would prevent men, who have historically been more successful at securing higher salaries, from being paid more than their female counterparts. While many lauded her strategy, not everyone was a fan.
Eaton can be included in the latter group. He worries that policies such as Reddit’s perpetuate stereotypes about men and women’s abilities – men are good negotiators, while women need protection from the process – and that they don’t fairly account for the fortitude of women and minorities. Further, Eaton, who in addition to his law practice is a business ethics and employment law instructor at San Diego State University, believes that taking salary off the table completely may pose ethical questions that lawmakers aren’t considering.
“There are some interesting philosophical questions surrounding the idea of letting people take advantage of their natural tendency to be better negotiators, and whether [having that skill] is an unfair advantage that ought to be taken off the table in the service of equality,” he said. “There is an argument for it that has been put forward by the philosopher John Rawls that would support what Ellen Pao did, which is to set starting salaries and make them non-negotiable in order to remove the advantage of men. It’s what Rawls would call the ‘undeserved advantage’ that some have just by virtue of being more willing and effective negotiators. However, there is a serious risk of devolving into stereotypes if you adopt that as a matter of policy.
What Eaton means is that by banning the discussion of salary history altogether, cities and states may be unintentionally tying the hands of those jobseekers – male or female – who do have effective negotiating skills.
While Eaton believes that having more transparency surrounding salary across the board would help – publishing salary ranges in job ads, for example – salary history would still play an important role in the conversation.
“While there certainly are efforts being made by some companies to set and review salary ranges before the interview process, salary history is still going to weigh into the conversation,” he said. “Say an employer has a salary range set for a role: if a candidate’s past salary is more closely aligned to the low end of the set range, it could affect an employer’s decision about whether or not to offer that person the higher end of their range,” he said. “Conversely, being able to have the conversation about salary history would also prevent candidates from being unfairly low balled.”
The question, Eaton said, is whether the ends justify the means when it comes to achieving economic justice for women and minorities. While he agrees that the conversation about salary history must be handled delicately and thoughtfully, he believes that making the conversation illegal is a mistake.
“Even Rawls rejects the idea that economic justice requires equal parts of the pie for everyone. He and others who adhere to his theory believe only that justice requires that any differences help the least advantaged,” he said. “The fact is that people are not powerless to negotiate beyond their current salary history if they believe that what they can bring to their prospective company merits more pay than is being offered. The idea that people are stuck because of their prior salary seems to ignore the variety of other factors that go into setting salary.”