Salary History Bans – Know the Limitations

By Sheila Hoover, courtesy of SBAM Approved Partner ASE

ASE has received many questions regarding the salary history ban many states have enacted recently. A salary history ban prohibits employers from asking applicants about their current or past salaries, benefits, or other compensation.  

Michigan prohibits salary history bans. Employers in Michigan are still permitted to ask candidates previous and current salary, benefits, and other compensation.  However, State of Michigan offices cannot ask an applicant about their salary history until a conditional employment offer is made. They also cannot ask current or prior employers or search public records to get that information. If salary is already known, it cannot be used to make a hiring decision.

On March 26, 2018, Michigan signed a bill that prohibits local governments from regulating the information employers can request from prospective employees during the interview process. Public Act 84 provides that “[a] local governmental body shall not adopt, enforce, or administer an ordinance, local policy, or local resolution regulating information an employer or potential employer must request, require, or exclude on an application for employment or during the interview process from an employee or a potential employee.” The law went into effect in June 2018 and remains in effect today.

Why are some states enacting laws that ban the salary history question?  These laws are aimed at ending the cycle of pay discrimination, and some go further than just banning pay history questions.  A few also prohibit an employer from relying on an applicant’s pay history to set compensation if discovered or volunteered, while others prohibit an employer from taking disciplinary action against employees who discuss pay with coworkers. 

Historically, requesting job applicants’ salary histories has been common practice for employers. Recruiters and hiring managers often use this information to exclude people from the candidate pool, either because the applicant is “too expensive” or their previous salary is so low, hiring managers think the person is poorly qualified or inexperienced.

While knowing the candidate’s salary history can be helpful during the recruiting process, there are other factors employers should use to determine if the candidate is a fit for their position.  First, employers must have a job description created that includes the required skills and experience needed to perform the job successfully.  Second, employers must have a compensation structure created that the job descriptions are aligned to. With these two items in place, employers can be assured they are offering candidates a salary that fits within the industry standards based on the skills and experience the candidate brings to the company. 

A good practice to enact, is to have your salary range determined prior to beginning the recruiting process for a specific position.  As candidates are screened, share the salary range with the candidate and ask if that fits into their requirement.  This will provide the employer and candidate with the salary information for each to determine if they want to continue with the recruiting process.

To help multi-state employers, we have provided a list of states that have enacted salary history bans.  Keep in mind, these salary bans vary in form.  Visit www.paycor.com for more detail on the bans for each state.