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Asking About an Applicant’s Former Salary – a Dangerous Proposition

Recently, the Governor of Massachusetts signed a new pay equity law that will prohibit employers from inquiring into applicants’ prior salaries.  The law goes into effect in July 2018 and it makes Massachusetts the first state in the country to have this type of law.

The idea behind the law is that employers oftentimes base salary offers on the applicant’s previous salary.  From a practical standpoint, this means people who have been earning below-market wages continue to be underpaid.  In essence, the past perpetuates the problem.  This has historically created pay disparities for women and minorities.  Therefore, as of July 2018, it will be illegal for employers in Massachusetts to ask about past salaries in the application process.

While this is not the law in Connecticut or the surrounding states, Massachusetts’s new law serves as a best practice for employers everywhere.  By perpetuating the cycle of underpaying particular groups such as women, the new employer can inadvertently set itself up for a lawsuit.  As way of example, a company hires two marketing directors with the same experience level around the same time.  One is a female who at her former job earned $55,000 a year and the new employer agrees to pay her $60,000.  The second is a male who at his former job earned $75,000 a year and the same new employer agrees to pay him $80,000.  There is now a $20,000 pay disparity for two new employees in the same position, with the same level of experience, and the only distinguishing factor is gender.  If the female employee discovers the salary disparity, she would have an attractive claim for gender discrimination and one that is hard to defend.  This type of pay disparity (albeit unintentional) would be avoided if the applicant’s salary is not set based on previous salary history.  The better practice is to set the position’s salary in advance of interviewing applicants with no regard to the employee’s previous salary.  But if you need to ensure your salary is competitive, an employer could ask the applicant for a desired salary.  Than it would be the applicant who is setting the standard, not the prior employers.  However, if you use this strategy, an employer still may face great salary disparities based on factors unrelated to the demands of the job.

Brody and Associates regularly provides counsel on personnel issues and employment laws in general.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.