Hiring: Compensation 'no-ask' laws: A Primer for Rhode Island Employers
by Meghan E. Siket
The Massachusetts Equal Pay Act (MEPA) is a “no-ask” law that will become effective on July 1, 2018. California, Delaware, New York City, Oregon, Puerto Rico, and San Francisco also recently enacted no-ask laws. Rhode Island employers may need to change their hiring practices—including job applications, interviews, background checks, and the process of making initial compensation offers—in order to comply with these new state and local laws.
What are no-ask laws?
No-ask laws are effectively bans on asking prospective employees about their compensation history. When determining the amount of compensation to offer, employers may not rely on how much the applicant has been paid in the past.
No-ask laws are generally amendments to state and local equal pay laws. The federal government and most states, including Rhode Island, prohibit employers from discriminating on the basis of gender in the payment of wages. These laws are referred to as “pay equity” or “equal pay” laws. To bolster these protections and attempt to close the gender-based pay gap for women, a number of states and local jurisdictions recently have amended their pay equity laws to explicitly prohibit employers from inquiring about the compensation history of a prospective employee, including salary and benefits.
These no-ask laws were passed to prevent employers from using an applicant’s compensation history in making an initial offer of compensation. Women are traditionally paid less than men and are more likely to have experienced pay discrimination. The prohibition on requiring disclosure of wage and salary history is intended to stop employers from continuing the presumably unequal pay practices of previous employers.
In Delaware, New York City, Oregon, and Puerto Rico, laws banning employers from asking prospective employees about their compensation history became effective in 2017. California’s law became effective on January 1, 2018. Massachusetts’ and San Francisco’s new no-ask laws will become effective on July 1, 2018.
Although each of these laws is a little different, they all have in common the prohibition on asking prospective employees about their compensation history before an offer of employment has been made.
Could other states’ laws affect RI employers?
Many Rhode Island employers hire employees who reside or work part-time in Massachusetts. The MEPA may apply to employers other than those located in Massachusetts. Although each factual situation is unique, Massachusetts will apply its wage laws, including the MEPA, to employers that transact business there and with its residents. This may affect Rhode Island employers that hire Massachusetts residents or that employ individuals who work across state lines.
Similarly, Rhode Island employers that hire employees or operate in California, Delaware, New York City, Oregon, Puerto Rico, or San Francisco also need to be aware of those jurisdictions’ no-ask laws.
What can and can’t employers ask?
To comply with these new no-ask laws, you cannot ask applicants about their pay history before making an offer of employment. For example, job applications may not include questions about wage and salary history. Any initial offer of compensation should be formulated without reference to compensation history, regardless of whether it’s discovered via publicly available information, a voluntary disclosure, or otherwise.
Applicants may voluntarily disclose their compensation history. However, a voluntary disclosure of compensation history at the preoffer stage should be treated similarly to the voluntary disclosure of membership in a protected category—i.e., ignored in the decision of whether to make an offer and how much to offer. This is because compensation history alone may not be used, per the no-ask laws, to justify a pay disparity for substantially similar work.
Instead of asking compensation history, you may ask any of the following questions:
- How much would you like to be paid?
- What are your compensation expectations for this position?
- What are your compensation requirements for this position?
When may employers ask?
After a negotiated offer of employment that includes compensation information has been made, you may seek to confirm compensation history as part of the negotiation process. However, the laws don’t prevent applicants from voluntarily disclosing compensation history to negotiate a better offer after an initial offer has been made. If they choose to voluntarily disclose after an initial offer, you may confirm what they reveal about their wage or salary history and use that information to inform a counteroffer.
Most former employers won’t reveal compensation history without authorization from the employee. Oregon’s new no-ask law expressly requires preauthorization, and there’s guidance issued under some of the other no-ask laws recommending written preauthorization. As a result, you may wish to require a written authorization during the negotiation phase in all instances where you seek to confirm compensation history. Such an authorization should include an acknowledgment that an offer of compensation has already been made and that the disclosure is voluntary and for the purposes of negotiating a better offer.
In any event, you shouldn’t make an offer contingent on providing compensation history. Rather, if the applicant voluntarily discloses compensation history with a counterdemand, you may confirm that information and use it to inform a counteroffer, if any.
This article is meant to provide general advice to Rhode Island employers related to the potential impact of new no-ask laws on their hiring practices. Each state and local law has its own quirks, and therefore, we recommend that employers that ask for compensation history in the hiring process consult with counsel to ensure compliance with applicable laws.
To discuss this further and directly with Meghan, she can be reached at firstname.lastname@example.org or 401-270-3136.