Understanding Salary History Bans: Compliance and Best Practices

One of the most significant legislative trends in recent years has been the implementation of salary history bans. 

These laws, which restrict employers from inquiring about a candidate’s previous compensation, aim to address wage disparities and promote fair pay practices. However, they also introduce new challenges in the hiring and pre-employment verification processes. 

Understanding these regulations is essential for ensuring compliance and maintaining a smooth hiring experience.

The Purpose Behind Salary History Bans

Salary history bans are designed to eliminate pay discrimination by preventing employers from using past compensation as a benchmark for new offers. Historically, basing salaries on previous earnings perpetuated wage gaps, particularly for women and underrepresented groups. By removing this factor from hiring decisions, legislators aim to create a more equitable job market where pay is determined by job responsibilities, experience, and industry standards rather than an applicant’s earning history.

Several states, cities, and counties across the U.S. have enacted these laws, each with unique provisions. While some prohibit direct inquiries about salary history, others go further by banning the use of voluntarily disclosed salary information in setting compensation. Many also restrict employers from seeking this data from third parties, such as background check providers.

How Salary History Bans Affect Pre-Employment Verification

Pre-employment verification processes traditionally include background checks, reference checks, and sometimes salary verification. With salary history bans in place, organizations must reevaluate their approach to ensure compliance. 

Here are key areas where these bans influence hiring workflows:

• Background Screening Adjustments: Employers need to work with background check providers to ensure salary history is not included in reports. Organizations using automated verification systems must update their protocols to exclude compensation-related inquiries.
• Interview and Offer Process Changes: Hiring managers must be trained to avoid salary-related questions during interviews. Instead, they should focus on discussing salary expectations and the pay range for the position.
• Compliance with Multi-Jurisdictional Laws: Companies operating across multiple states must navigate varying regulations. A policy that aligns with the strictest jurisdiction can help ensure consistency and legal adherence.

What Employers Can Do Instead

While salary history is off-limits in many places, employers can still make informed compensation decisions. 

Here are alternative strategies to determine fair pay for new hires:

• Use Market Data: Compensation benchmarking tools provide insights into industry standards, helping employers set competitive and equitable salary ranges.
• Discuss Salary Expectations: Instead of asking about past earnings, employers can inquire about a candidate’s salary expectations to gauge alignment with the company’s pay structure.
• Leverage Internal Pay Equity Reviews: Conducting internal audits ensures that new salaries align with existing compensation frameworks, preventing disparities within the organization.

Ensuring Compliance and Avoiding Penalties

Violating salary history bans can result in fines, lawsuits, and reputational damage. 

To avoid these risks, companies should take proactive steps:

• Revise Job Applications: Remove any fields that request salary history.
• Train Hiring Teams: Educate recruiters and hiring managers on legal requirements and alternative approaches to salary discussions.
• Update Background Check Policies: Work with screening providers to exclude salary verification unless legally required for specific roles.
• Monitor Legal Updates: Salary history bans continue to evolve, so staying informed about changes in relevant jurisdictions is critical.

Creating a Fair and Competitive Hiring Process

Adapting to salary history bans requires a shift in hiring practices, but it also presents an opportunity to build a more transparent and equitable compensation structure. 

By focusing on job-related qualifications, market data, and internal pay equity, companies can attract top talent while ensuring compliance with fair pay laws. 

This approach not only fosters a more inclusive workplace but also strengthens employer branding in a competitive job market.