United States: You're Gonna Need A Bigger Boat: Pay Equity Initiatives Flood The State Legislatures

Last Updated: February 19 2018
Article by Aaron Crews

In 2017, legislatures in more than 40 jurisdictions across the United States considered more than 100 bills intended to narrow the lingering pay gap between men and women. While only a handful of those proposals ultimately became law, this wave shows no signs of subsiding. Most state legislatures are back in session, and lawmakers are quickly picking up where they left off.

At least 23 states, from Hawaii to New Jersey, have introduced some type of pay equity measure thus far in 2018. These bills (approximately 50 to date) often take different approaches. Some measures would broaden existing equal pay laws, for example, while other proposals would create new restrictions, such as a ban on employer salary history inquiries. The rationale underlying the salary history bill trend is that pay inequities are perpetuated when current pay is based on past employer decisions that could have been discriminatory. Legislatures have also considered wage transparency measures, which prevent employers from banning pay disclosure in the workplace, or from retaliating against employees who discuss their wages with others. In recent years, salary history and pay transparency proposals have been introduced as standalone bills or incorporated into more expansive pay equity legislation.

With a variety of statutes taking effect in 2018, plus the torrent of pay equity bills, employers should pay close attention to this issue. This article surveys some of the newest legislation in this area and highlights bills pending in various statehouses.1

Pay Equity Laws That Took Effect Recently—or Soon Will

Our review of key developments begins with four salary history laws, reflecting their popularity at the state and local level. Salary history restrictions are also included in sweeping amendments affecting the equal pay laws of Massachusetts, Oregon, and Puerto Rico, each discussed below.

Enacted Salary History Laws

New York City. As of October 31, 2017, it became illegal for New York City employers to make any salary inquiry of an applicant, or the applicant's current or former employer, or a current or former employee (or agent) of the applicant's current or prior employer.2 Employers likewise may not conduct any form of search through publicly available information for a prospective employee's salary history. Under this amendment to the city's Human Rights Law, it is also an unlawful discriminatory practice for an employer to consider an applicant's salary history in determining the salary, benefits, or other forms of compensation for that applicant. However, if an applicant voluntarily and without prompting provides salary history, then this information can be used to determine the salary, benefits, and other compensation, and the employer may verify the salary history.3

Delaware. A salary history statute took effect in December 2017 in the First State, making it unlawful for an employer to screen applicants based on their compensation histories.4 The law also prohibits employers from requiring that an applicant's prior compensation satisfy minimum or maximum criteria for the job. Employers no longer may seek the compensation history of an applicant from the candidate or a current or former employer, except under narrow circumstances. Monetary penalties for violations of this law are steep, ranging from $1,000 to $5,000 for a first offense, and up to $10,000 for a subsequent offense. The law does not specifically prohibit employers from considering salary history when setting compensation, if applicants voluntary disclose that history.

California. As of January 1, 2018, a salary history ban (A.B. 168) applies to all California employers, including state and local governments.5 Under A.B. 168, no employer may rely on an applicant's prior salary history "as a factor in determining whether to offer employment . . . or what salary to offer an applicant." Salary history information includes both an individual's rate of compensation as well as other benefits. Moreover, an employer cannot—orally or in writing, directly or indirectly—seek this type of information about an applicant. Accordingly, employers and their agents can no longer ask candidates, or their current or former employers, what candidates have earned in the past. An employer must, upon reasonable request, provide an applicant with the pay scale assigned to the position sought.

There are certain exceptions to the California salary history restriction. First, employers may review and consider salary history information that is publicly available pursuant to federal or state law. Second, salary history may be discussed if an applicant "voluntarily and without prompting" discloses his or her history to a potential employer. In that event, the employer may consider and rely on that history in setting that applicant's salary.

Employers in the Golden State also should bear in mind that, even where consideration of salary history is permissible, prior salary alone cannot be used to justify paying any employee of a different sex, race, or ethnicity less than another employee for performing substantially similar work under similar working conditions.6

San Francisco. Three months before California adopted the state-wide salary history ban, the City of San Francisco passed its own version: Ordinance No. 170350.7 This ordinance takes effect July 1, 2018 and is broader than the state counterpart.

Like A.B. 168, the ordinance bans employers, including city contractors and subcontractors, from asking applicants about their current or past salary or considering an applicant's salary information in determining whether to hire an applicant or what salary to offer. But Ordinance No. 170350 goes further, prohibiting employers from disclosing a current or former employee's salary history without that employee's authorization, unless the salary history is publicly available. The ordinance, however, does not prohibit an employer from verifying non-salary-related information disclosed by the applicant. Nor does it preclude an employer from running a background check—as long as that background check is otherwise consistent with the law and the employer does not consider any salary history information that is revealed during the background check. Ordinance No. 170350 also prohibits retaliation and imposes a workplace posting obligation.

Enacted, or Enhanced, Comprehensive Equal Pay Laws

Massachusetts. On August 1, 2016, Massachusetts Governor Charlie Baker signed the Act to Establish Pay Equity (AEPE).8 The AEPE, which becomes effective on July 1, 2018, makes it illegal to pay employees compensation at a lower rate than the rate paid to employees of a different gender for comparable work. Under the AEPE, "comparable work" is "work that is substantially similar in that it requires substantially similar skill, effort, and responsibility and is performed under similar working conditions." The law also specifically provides that comparable work is not limited to employees who have the same job title.

In addition, the AEPE includes both salary history and wage transparency provisions. The law states that employers may not: (1) require that an employee refrain from inquiring about, discussing or disclosing information about the employee's own wages, or any other employee's wages; (2) screen job applicants based on their wages; (3) request or require an applicant to disclose prior wages or salary history; or (4) seek the salary history of any prospective employee from any current or former employer, unless the prospective employee provides express written consent, and an offer of employment—including proposed compensation—has been made. Retaliation against employees who oppose an action or practice banned by the AEPE is also unlawful.

The Massachusetts AEPE also contains important affirmative defenses for employers—defenses that were not available under the old law. An employer may not be liable if it can demonstrate that a pay disparity for comparable work is based on one or more of the following factors: (1) bona fide seniority or merit-based systems; (2) compensation based on quality or quantity of production (e.g., piece-rate work); (3) workplace geographic locations; (4) differing levels of education, training or experience, to the extent relevant to the particular job and consistent with business necessity; or (5) travel, if necessary and regular for the specific job.

The AEPE additionally provides a "self-evaluation" defense. Employers that complete a good-faith self-audit of their pay practices within three years of a claim, and can demonstrate that "reasonable progress has been made towards eliminating compensation differentials based on gender," have an affirmative defense to liability for an equal pay violation. The self-evaluation may be of the employer's own design, so long as it is reasonable in scope or detail in light of the size of the employer or is consistent with standard templates to be issued by the state attorney general. Evidence of an employer's self-evaluation or remedial measures is not admissible in later lawsuits, under certain circumstances.

Oregon. The Oregon Equal Pay Act of 2017, signed into law on June 1, 2017, goes even further than the Massachusetts amendments.9 This statute outlaws discrepancies in compensation (which includes wages as well as bonuses, benefits, and equity-based compensation) for work of a comparable character on the basis of any protected characteristic—such as race, religion, sex, sexual orientation, national origin, marital status, veteran status, disability, or age. As in Massachusetts, employers may pay employees at different compensation levels if the disparity is due to a bona fide factor related to the position based on: (1) a seniority system; (2) a merit system; (3) a system measuring earnings by quantity or quality of production; (4) workplace locations; (5) travel (if necessary and regular); (6) education; (7) training; or (8) experience. Like similar statutes in other jurisdictions, employers may not reduce the wages of employees to comply with the law.

The Oregon Equal Pay Act also restricts salary history inquiries and expands existing remedies available to employees. Nonetheless, it provides a safe harbor for employers that have voluntarily assessed their pay practices to identify and eliminate discriminatory pay practices. An employer may move to disallow awards of compensatory and punitive damages, for example, if it can show that it: (1) completed, within three years before the date that the action was filed, an equal pay analysis of its pay practices in good faith that was reasonable in detail and scope, and related to the protected class asserted by the plaintiff; and (2) eliminated the wage differentials for the plaintiff and has made reasonable and substantial progress toward eliminating wage differentials for the protected class at issue. The bulk of these new provisions become operative on January 1, 2019.

Puerto Rico. On March 8, 2017, Puerto Rico enacted a similarly expansive equal pay bill, known as Act 16.10 Pursuant to Act 16, employers may not engage in pay discrimination based on sex among employees performing comparable duties that require the same skill, effort, or responsibility under similar working conditions. Exceptions are recognized for: (1) bona fide seniority or merit-based systems; (2) compensation based on quantity or quality of production, sales or profits; (3) differing levels of education, training or experience to the extent these factors are reasonably related to the specific job; and (4) any other reasonable factor that is not related to the person's sex. As with the Massachusetts AEPE, the statute incorporates wage transparency and salary history prohibitions.

Further, and typical of equal pay laws, Act 16 makes it unlawful to retaliate against employees who address or discuss pay inequality. Employers also may face double damages as a penalty under Act 16. That being said, the law provides some immunity from double damages for employers that can prove that, within the year preceding the filing of the complaint, they initiated a good-faith self-evaluation of payment practices and made reasonable progress in eliminating sex-based salary differences. Importantly, self-evaluation documents cannot be used in proceedings to establish violations for events that occurred prior to or within six months of the completion of the self-audit, or after a year of its completion, if the employer can establish that it is implementing a plan to resolve any sex-based pay differences. While Act 16 took immediate effect, employer penalties are not recoverable until March 8, 2018.

Notable Pending Pay Equity Proposals

Even as employers adjust their policies and procedures to comply with the new laws discussed above, they must keep a watchful eye for additional regulations. Numerous pay equity measures have been proposed, and, as noted below, a few are already showing potential.

Comprehensive Equal Pay Bills

Thus far in 2018, more than 10 states have introduced bills to adopt pay equity laws or strengthen existing statutes. A Washington proposal (H.B. 1506), for example, would amend the equal pay act to outlaw any discrimination in compensation based on gender between employees who are "similarly employed."11 According to the bill, "employees are similarly employed if the individuals work for the same employer, the performance of the job requires similar skill, effort, and responsibility, and the jobs are performed under similar working conditions." The measure provides that "[j]ob titles alone are not determinative" of this similarity.

That being said, H.B. 1506 would permit pay discrepancies if "based in good faith on a bona fide job-related factor," so long as that factor is "consistent with business necessity," is not "derived from a gender-based differential," and accounts for the entire disparity. Such factors can include education or reliance on a seniority, merit, or piece-rate compensation system.

While these terms are similar to other updated, more progressive equal pay statutes, H.B. 1506 does not stop there. It further states that employers may not limit an employee's "career advancement opportunities" on the basis of gender, including by failing to announce such opportunities or provide training.12 This Washington bill also includes a wage transparency provision. H.B. 1506 has passed the Washington house and is presently under review in a senate committee.

Other equal pay permutations were proposed in Alabama, Arizona, Hawaii, Indiana, Missouri, Mississippi, Nebraska, New Jersey, Rhode Island, South Carolina, and Tennessee. Meanwhile, in Mississippi, several measures that would have created a new equal pay law have already died in committee.

Standalone Salary History Bills

State lawmakers continue to gravitate toward salary history bills. Legislators in at least 11 jurisdictions, including Arizona and Rhode Island, have introduced such measures.

Proposals in Illinois and New Jersey may prove particularly promising. Illinois nearly enacted a salary history bill in its last legislative term.13 Governor Bruce Rauner vetoed a salary history proposal, and lawmakers fell short when attempting to override that veto in November. But an identical bill (H.B. 4163) was introduced soon thereafter, and it is now progressing through the house.14

Like Illinois, New Jersey came very close to prohibiting salary history inquiries in its 2016-2017 session. A bill passed both chambers but died on Governor Chris Christie's desk. Subsequent proposals have been filed, however, and the new Democratic governor, Phil Murphy, is inclined to enact a salary history ban if given the chance.15 Indeed, his first executive order, signed the same day as his inauguration, barred state agencies from asking job applicants about their prior wages.16

Standalone Wage Transparency Bills

Finally, at least 10 states will be weighing standalone wage transparency bills in 2018. Lawmakers in states spanning from Hawaii to Virginia have introduced such measures, which await committee review.

Given the number of pending pay equity bills, and the unlikelihood of federal equal pay legislation advancing this year, efforts to promote pay equity legislation at the state and local level are expected to persist. We will continue to monitor these developments and guide employers as the landscape grows increasingly complex.

Footnotes

1 For a similar review of laws enacted and proposed in 2017, see Ilyse Schuman & Michael J. Lotito, Mid-Year Roundup: Equal Pay and Related Bills Command Attention in 2017, WPI Report (July 5, 2017).

2 Int. No. 1253-2016, N.Y.C. Council (2017), available here. See also María Cáceres-Boneau et al., New York City Set to Ban Inquiries About Salary History, Littler ASAP (Apr. 14, 2017).

3 In addition, employers should be aware that the State of New York has its own equal pay statute on the books, which was most recently amended in 2016 to include a wage transparency provision. See Jean L. Schmidt, New York Expands Protections for Women with Passage of Women's Equality Act, Littler Insight (Nov. 3, 2015).

4 H.B. 1, 149th Gen. Assemb. (Del. 2017), available here. See also Joon Hwang, Delaware Enacts Law to Address Gender Pay Gap By Prohibiting Employers from Requesting Compensation History of Job Applicants, Littler ASAP (June 19, 2017).

5 A.B. 168, 2017-2018 Leg. (Cal. 2017), available here. See also Bruce Sarchet, New California Law Prohibits Salary History Inquiries, Littler ASAP (Oct. 13, 2017).

6 See Cal. Lab. Code § 1197.5(a)(3).

7 Ordinance No. 170350, City and Cty. of S.F., Board of Supervisors (2017), available here. See also Bruce Sarchet & Corinn Jackson, Another San Francisco Treat: Mayor Lee Signs Salary History Ban, Littler ASAP (July 20, 2017).

8 S.B. 2119, 189th Gen. Ct., Ch. 177 of the Acts of 2016 (Mass. 2016), available here. See also Christopher Kaczmarek et al., Massachusetts Adds Teeth to Equal Pay Obligations, Littler Insight (July 28, 2016).

9 H.B. 2005, 79th Legis. Assemb., 2017 Reg. Sess., Ch. 197 of 2017 Laws (Or. 2017), available here. See also Cody Emily Schvaneveldt, Oregon Enacts New Equal Pay Law that Includes Salary History Inquiry Restrictions, Littler ASAP (June 1, 2017).

10 P.R. Law No. 16-2017 (P.R. 2017). See also José Dávila Caballero & Mariela Rexach, Puerto Rico Adopts Local Equal Pay Act, Littler ASAP (Mar. 9, 2017).

11 Information about Washington H.B. 1506, including the most current version, is available here.

12 In 2016, Maryland updated its equal pay statute to include this type of provision. See Md. Code Ann., Lab. & Empl. §§ 3-301 et seq. That amendment prohibits employers from engaging in wage discrimination for work of a comparable character and also precludes employers from "providing less favorable employment opportunities" due to an employee's sex or gender identity. See also Steven Kaplan & Eunju Park, Key Legislation Emerging from the 2016 Maryland General Assembly Session and Local Ordinances to Remember, Littler ASAP (May 23, 2016).

13 See Darren Mungerson & Betsy Cammarata, Will Illinois Ban Salary History Inquiries? Hang on for a Bumpy Override!, Littler ASAP (Oct. 30, 2017).

14 Information about Illinois H.B. 4163 is available here.

15 Information about New Jersey A.B. 1094 is available here, for example.

16 Matt Arco, Phil Murphy signs executive order on equal pay for women, NJ.com, Jan. 17, 2018 (indicating that Murphy stated "he 'would make it state law'" if the legislature sent him a salary history bill that covered private employers).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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