Vermont Enacts Law Restricting Salary History Inquiries

Vermont Enacts Law Restricting Salary History Inquiries

Vermont Governor Phil Scott signed legislation on May 11 that will bar employers from asking job candidates about their salary histories during the recruiting process, Littler Mendelson attorney Joseph A. Lazazzero reports at Lexology:

The new law, H. 294, effective July 1, 2018, prohibits asking a prospective, current, or former employee about or seeking information regarding his or her compensation history. For these purposes, compensation includes base compensation, bonuses, benefits, fringe benefits, and equity-based compensation. Under the new law, employers are also prohibited from requiring that a prospective employee’s current or past compensation satisfy minimum or maximum criteria for employment. If an employer discovers a prospective employee’s salary history, the employer may not determine whether to interview the prospective employee based on this information.

Like similar prohibitions in other states, Vermont’s new law still allows employers to confirm a candidate’s past pay if the candidate discloses it voluntarily, as well as to ask about candidates’ salary expectations. When the bill was introduced in the state legislature in January, its sponsors told Vermont Public Radio that it would help close the state’s gender pay gap, which stands at around 16 percent for full-time workers. The original bill also instructed the Vermont Department of Labor to collect new data on gender pay disparities in the state, VPR reported at the time, but this provision does not appear in the final bill signed by Scott last week.

States with Democratic legislatures and governors have been steadily passing gender pay equity laws over the past two years, many of which ban or restrict inquiries about salary histories. These bans aim to close the pay gap by ensuring that pay disparities early in employees’ careers are not perpetuated in each subsequent job, but critics say there is no hard evidence for a relationship between pay gaps and the use of salary histories in negotiating pay and that restricting the information employers can collect might backfire by encouraging discriminatory guesswork about candidates’ previous compensation. Nonetheless, even though most employers still ask about them, the behavior of state governments and large employers is pushing a trend away from salary histories and toward more transparent and rational methods of negotiating pay.

The question is still being shaken out in the court system as well. In a landmark ruling last month, the Ninth Circuit Court of Appeals decided that differences in past salaries are insufficient to justify disparities in pay between male and female employees in the same role, but other circuit courts have ruled otherwise. A federal judge in Pennsylvania, meanwhile, recently ruled that Philadelphia’s ban on salary history inquiries violated employers’ First Amendment right to free speech but upheld the city’s right to bar employers from basing salary offers on that information as a means of combating wage discrimination.