California Tackles Pay Discrimination in Employment by Banning Inquiries into Past Compensation

by | November 9, 2017 | Employment Discrimination

Beginning January 1, 2018, employers in California may no longer inquire into prospective employees’ compensation history. The goal of this measure is to reduce the substantial gaps in pay for female and minority employees.

On October 12, 2017, Governor Jerry Brown signed AB 168 into law. The Bill adds a new section containing several important protections to the California Labor Code. Under the new section, 432.3, employers may not seek or rely on information about a job applicant’s compensation from prior work in determining whether to make a job offer or in setting a starting salary. Additionally, upon a reasonable request, employers must provide job applicants the pay scale for a position.

While employers may not seek compensation history information, applicants for employment remain free to provide that information voluntarily. In the event that an applicant for employment does so, AB 168 does not prohibit the employer from relying on that information in setting pay. However, this will not permit employers to use prior salary, by itself, to justify a pay disparity, which the California Equal Pay Act prohibits.

AB 168 is intended to reduce the wage gap that affects women and minority employees by preventing reliance on compensation in past employment. A September 9, 2017 Bill Analysis by the Senate Rules Committee noted that, according to proponents of AB 168, a gender-based wage gap persists “regardless of industry, occupation or education level and the disparity is even larger for women of color.” Federal and state laws prohibiting discrimination have proven ineffective at closing this gap. This may be, in part, because of the difficulties employees encounter in pay discrimination lawsuits under federal law, as in the recent Ninth Circuit case of Rizo v. Yovino, in which the court found that employers could rely on past salary to justify sex-based pay disparities. As a result, under federal law in some jurisdictions, prior pay discrimination can follow workers from job to job. The California Equal Pay Act explicitly prohibits employers from relying solely on past compensation to justify pay disparities. AB 168 builds on this protection in hopes of ensuring “that job applicants, who have historically been victims of lower wages, will not continue to be plagued by unequal wages throughout their career,” according to the September 9 Bill Analysis.

AB 168 leaves open several questions of construction. AB 168 does not define pay scale, nor provide context for the meaning of a “reasonable request.” Many employers may take the position that they do not maintain “pay scales” for certain jobs. AB 168 does not contain an exception for employers under these circumstances. Therefore, it is likely that employers will be required to provide some information about potential compensation regardless of whether they maintain formal pay scales and that the nature of this requirement will be worked out in the courts.

The law also does not explicitly prohibit retaliation against employees who attempt to avail themselves of its protections. Employees’ resistance to prospective employers’ request for pay history information or efforts to obtain pay scales may be protected activity under other anti-retaliation provisions of the Labor Code. Notably, AB 168 explicitly exempts its requirements from Labor Code section 433, which would otherwise make violation of these provisions a misdemeanor.

AB 168 is effective January 1, 2018 and applies to all employers, including both private sector and government employers. Employees seeking additional information about their rights under this law should contact an employment lawyer.