What California Hiring Managers Need to Know About California’s New Compensation History Law

Question:

What are the key changes to California's employment law taking effect on January 1, 2018, outlined within AB 168?

Jenn:

AB 168, which will be enacted as California Labor Code section 432.3, prohibits employers from asking for and relying upon historic compensation information when determining whether to offer an applicant employment or what compensation to offer an applicant. It also requires that when an applicant reasonably requests a pay scale for the position, the employer provides it.

Question:

As stated in AB 168, an employer, upon reasonable request, shall now provide the pay scale for a position to an applicant applying for employment. What are the implications of “upon reasonable request?”

Jenn:

The law doesn't define what “reasonable request” is. There is not much guidance as to what would be an unreasonable request at this point. That being said, it does not require that employers voluntarily post the pay scale in a job description or job advertisement. Employers may choose to do so in an effort to screen out individuals who may self-select based on their desire or need for higher compensation.

Question:

What do you consider to be the most important process or procedural changes employers need to address this month as it relates to AB-168?

Don:

First, it is important to train employees who have any involvement in hiring or interviewing applicants to ensure that they understand all of the implications of AB 168. Rather than asking about prior compensation, this presents your employees with an opportunity to ask questions that relate to the specific job for which the applicant is applying to determine if the applicant is qualified and what the applicant’s salary expectations are.

Second, accounting and finance hiring managers need to clearly define position requirements. Then they will need to work with their HR department and/or DeWinter Group to discuss market rate for that profile and ensure it fits within their budget. By doing so, this establishes a consistent approach to determining what to offer candidates.

Question:

The city of San Francisco passed a law limiting an employer's ability to request compensation history as well. What are the additional implications of the San Francisco law?

Jenn:

Yes, San Francisco passed the Parity in Pay ordinance (Ordinance No. 143-17, Article 33J of the Police Code) that prohibits employers [operating in San Francisco or that have employees working in San Francisco] from inquiring about an applicant's current or past compensation on July 11 of this year. Similar to AB 168, Ordinance No. 143-17 will “help ensure that an individual's prior earnings, which may reflect widespread, longstanding, gender-based wage disparities in the labor market, do not continue to weigh down a woman's salary throughout her career. This measure will also help ensure that both employers and workers are able to negotiate and set salaries based on the qualifications of the person and the job in question, rather than on an individual's prior earnings, which may reflect widespread, longstanding, gender-based wage disparities in the labor market.”

Question:

For those situations in which an employer operates in San Francisco, will there ever be an instance where the legal stipulations outlined within the San Francisco Parity in Pay Act will precede those established within AB 168?

Jenn:

Whichever legal protections for employees are greater will control in a given situation.

Question:

What should an employer do if he/she accidentally asks for compensation (out of the habit of former hiring processes)?

Don:

If an employer, hiring manager, or HR representative accidentally asks for compensation (or benefits), the DeWinter Group recommends contacting a legal firm such as Hoge Fenton. It is better to be safe than sorry. When this occurs, everything is situational and all of the facts need to be explored before your legal counsel can provide an informed recommendation as to how to proceed.

Question:

Do you anticipate seeing any further changes to employment compensation history law in California within the coming year?

Jenn:

I am not aware of anything coming down the pike but San Francisco generally leads the way. California often follows San Francisco, and then other cities follow suit. This could be the beginning of a trend in this respect.