Today is Equal Pay Day. According to Institute for Women’s Policy Research, white women make only 80.5 cents for every dollar men make. The wages are even lower for Black and Hispanic women. (Hispanic women will have to work an additional 232 years for pay parity!) We all know that something has to be done about it. So how is the wage gap going to change?
Salary History Bans. According to HRDive, seven states and six localities have prohibited employers from asking candidates about their current or previous salary histories. The theory supporting the bans is that if an employer sets an employee’s wage based upon what she previously made, the new employer may be perpetuating the wage gap. If an employer can’t ask the previous salary history, then the employer will be setting the wage on either the market rate for the position or based upon what the employee desires – a question that is not prohibited.
For reasons that remain a mystery, some are vehemently opposed to salary history bans. Michigan passed a law prohibiting any localities from enacting salary history bans while others have initiated a lawsuit to prohibit the law from going into effect. Their arguments for asking the question and as such against the bans are stopping title inflation, salary histories actual verify previous performance, or we already have laws that prohibit wage disparity. However, we still have significant wage disparity. So if we can’t ask one question, will our entire recruiting process fall? (Spoiler: No.)
Yes, there are detractors to salary history bans. They argue that salary history bans will hurt women in the long-run given our poor salary negotiation skills. However, if we set salaries based on the market and our own payroll, then the job pays what it pays. No negotiation necessary. Try the Ellen Pao method.
Reinterpret Existing Law. Yesterday – one day before Equal Pay Day – the Ninth Circuit Court of Appeals held that a candidate’s previous salary cannot be a defense to an Equal Pay Act claim. Specifically, Judge Stephen Reinhardt (in what may be his last opinion) wrote, “To hold otherwise—to allow employers to capitalize on the persistence of the wage gap and perpetuate that gap ad infinitum—would be contrary to the text and history of the Equal Pay Act.” This decision is a big deal for a couple of reasons: (1) an employee’s previous salary could have been used as a defense to a wage gap previously – this decision stops that, (2) the decision bolsters salary history bans, and (3) the decision limits employer discretion in determining pay to only job-related criteria for determining pay. This alters the law in a way that may reduce the wage gap.
Market Rule. I, like many others, encourage employers to use market rates. This means that employers have to invest and participate in salary surveys. That said, the benefit of paying the market rate without regard to what a candidate used to make levels the playing field for employers and candidates. Employers can feel confident that they are going to find candidates and differentiate themselves from their competition based on workplace culture. Candidates can differentiate between employers without regard to pay. They can find the workplace that fits them best.
When it comes to the wage gap and Equal Pay Day is that we have to do better. Use market rates, don’t ask salary history questions (on applications or in interviews), review your payroll to determine if gaps exist, and work with your friendly neighborhood employment attorney to help do the right thing.
If you’d like more information or to read some opinion on Equal Pay Day, check out Lilly Ledbetter’s take.