Asking job applicants how much they make with their current employer, or what they’ve been paid in prior positions, are common questions in job interviews for many hiring employers. While questions on salary history generally are not per se unlawful – yet – they can land an employer in hot water. The legal theory against salary questions in onboarding is based on the Equal Pay Act of 1963 and its state law counterparts. These laws make it unlawful for an employer to pay women less than men for doing the same work. However, despite more than 50 years since the Equal Pay Act became law, there are growing concerns that women continue to be paid less than men. If true, basing job offers on a woman’s salary history could serve to perpetuate gender-based disparities in pay. This was the rationale in a recent decision issued by the U.S. Court of Appeals for the Ninth Circuit, in California, which held that setting initial pay of new hires based on their salary history cannot serve as a defense to an Equal Pay claim. This decision conflicts with a 1995 opinion of the U.S. Court of Appeals of the Seventh Circuit, in Chicago, which held that salary history is a “factor other than sex” that may provide a defense to claims challenging pay differences based on gender. A showdown before the U.S. Supreme Court now seems likely. Additionally, emerging laws and administrative requirements aimed at “closing the pay gap” and/or “breaking the glass ceiling” are ushering in significant change. Employers who fail to stay ahead of this trend risk trouble down the road.

Already companies such as Google are embroiled in class-action lawsuits alleging equal pay violations based on their use of applicant salary history in setting pay in their initial offers of employment. This trend can also be seen in the fact that several states have enacted new legislation akin to “Ban-the-Box” laws that prohibit employers from even inquiring about an applicant’s pay history. Other states have transparency laws designed to enable employees to see for themselves what others are paid; e.g. Minnesota’s Women’s Economic Security Act (WESA), which requires employers to advise employees (in writing, in their handbooks) of their right to discuss their wages with co-workers. And although currently on hold, the EEOC’s proposed new EEO-1 Form would have employers disclose to the federal government their pay practices with respect to gender.

Whether the Equal Pay Act has largely failed to accomplish its goal of ensuring that women receive the same pay as men doing the same jobs, or, like any other employment law it sometimes is violated by some employers, is the subject of ongoing debate. However, one thing is beyond debate: there is an intense spotlight on this issue that is coming from plaintiff lawyers, government authorities, women’s groups and, more recently, Hollywood celebrities alike. This is not going away anytime soon. Employers can and should expect to see more challenges to pay practices based on gender. In many cases these challenges will be in the form of class-action lawsuits. Those employers who are indeed paying women less for doing the same work as men, will pay a price. Those who do so unintentionally, as in the case of using pay history of applicants to set initial wages, may soon find themselves paying the same price as those who flout the law.

Questions? For assistance in conducting an internal audit of pay practices, establishing onboarding protocols to avoid unintended pay disparities, or for further information on this emerging issue in workplace law, contact Attorney James B. Sherman at 952-746-1700 or jasherman@wesselssherman.com