Posted on August 27th, 2018
Did you know that in California you can longer ask about an applicant’s salary history?
That’s right. A.B. 168 was signed into law in October 2017 and with it California has prohibited you the employer from asking your job applicants for their salary history information.
Since less than one in five American workers think they make enough money, you can see there is a culture of workers not being satisfied with pay and always looking for more.
They are looking to take away negotiating tools from business when it comes to establishing salary and this is another example of that.
If the new ban on asking about salary history has you nervous, here are a few things you should know about how the new law affects you and your business.
1. No Employer Too Small
Many of the crazy California employment laws only apply to business over a certain size. But with this one it doesn’t matter who you are or the size of your enterprise, this law applies to every business.
No industry is exempt from the law either. Whether you’re running a charter school, dairy farm, or a tech startup, you need to abide by the salary history ban.
If you have this element on job applications for your office, you need to remove it. Unfortunately, the law doesn’t bend even if you’ve already printed up 10,000 copies of your general job application.
If you have any kind of business or institution big enough to have employees, the laws apply to you. While there are many laws that differentiate small enterprises from independent shops and nonprofits, you need to abide by this law whenever you’re hiring an employee for any of your California business.
By taking on these changes as soon as possible, you can avoid potential class action lawsuits from job applicants. I’m sure there will be attorneys sniffing around looking for companies that are violating the law without knowing it.
2. Wages Cannot Affect Employment
Labor Code section 432.3 prohibits employers from using salary history to make any decisions about employment. If you meet a qualified employee who you want to hire, you need to offer them whatever you think is fair and what would attract them to the job.
You can’t let it be know that salary history had any determination on whether or not you offer them the job!
That means you need to be up on what is a competitive salary in your field. While you can’t ask potential employees what they were making at previous jobs, you can do your own research. Ask around to colleagues and other business owners to see what they’re offering people for similar jobs.
Sites like Glassdoor can also give you a window into what can be offered to good employees. But these sites are kind of like Zillow is to real estate. Not 100% accurate but a good way to get a ball park figure.
You can’t use someone’s history to determine what to pay them either. If someone is used to making $20,000 less than their peers, this could be the reason they’re now out looking for a new position.
If you really want this person don’t expect to get a good deal on an employee by undercutting them, as you might be reminding them of the place they’re leaving behind and you will start off on the wrong foot.
3. You Can’t Seek It Out Either
If you think you can go around the person and find out what they made at their last job without asking them directly, you should still avoid it.
The law says you can’t seek out anyone’s history, no matter how easy it may be to get.
Even if you know their former employer, seeking out salary history is prohibited by that law and probably a good idea to just not go there.
This includes compensation and benefits too.
While this puts you at some form of a disadvantage for offering competitive benefits to your candidates and potential employees, it could potentially offer some other advantages.
You’re now required to seek out what is standard in your industry and what you should be offering talented potential employees in that position.
This puts your finger on the pulse of how your industry is growing and changing and you will have more accurate ways of forecasting your labor costs in your business decisions.
If wages are going up but consumer prices aren’t, it could be time to reassess your business model. Instead of being at risk of falling behind, you can stay competitive by seeing those changes before they make an impact on your business that you cant recover from.
In the startup world for example, as apps and technology have grown up, so have the people who work in the industry.
They now demand more family leave, comprehensive health care packages, and retirement options. So if you were in that field and looking to grow with more employees, you would have a more realistic expectation of what new hires expect and budget accordingly.
4. Know The Payscale
It’s now both legal and considered reasonable for potential employees and applicants to request a pay scale from your company for the position you are hiring.
Again, this requires you and your business to have a finger on the pulse of what’s happening in your industry and what is considered standard rates.
You should also have an intimate knowledge of pay scales and standards at your own enterprise.
Your applicants should submit their pay scale requests to you in a reasonable fashion.
They can’t expect you to pull it out of thin air, but if you can’t give them one within a reasonable time of giving them an offer, you could be violating the law.
Your best bet is to have your HR department put together a scale and update it on a regular basis. If you do not have an HR team contact us and we can help put together pay scales for each position that you have so you can use them now and in the future.
This pay scale could take into account industry standards or it could just be focused on what goes on between your four walls.
Employees have more power than ever to see what different companies are offering in compensation before applying. So for important positions you will want to stay competitive in pay so you can attract that top talent.
If you are paying way below industry standards at important positions applicants will know and you will likely have trouble getting the best talent out there. .
5. You Can’t Stop Them From Saying Something
Your reputation rides partially on how you treat your employees. If you don’t pay them adequately, you can’t ask them not to disclose what they do or don’t make.
It is up to their discretion to tell a potential employer or another employee what they make.
In another effort to tilt all the power to the employee side, salary disclosure laws allow your current employees to discuss what they make with who they want.
Not only can the word get out on your compensation practices to prospective employees and applicants, but it can also get out to your competition.
You could be losing applicants to your competition if you don’t pay enough.
The best way to combat losing the race for talent is to your research so that you can pay competitively.
Is Their Any Positive Side to Salary History Ban For Employers?
When everyone speaks openly about salary history, it can potentially improve your workers’ morale. There may be less worrying about what other people are making and if its fair to them if there are open pay scales for positions.
But as usual any new labor law in California is always created and written for the benefit of the employee, not the employer.
So we will have to wait and see if the laws on salary ban history create a big problem for us business owners.
If you worry about how your workplace could be vulnerable to any kinds of lawsuits from employees and applicants, we can offer you a FREE CONSULTATION on how to avoid these types of problems.
