The Salary Privacy Act—Stacking the Deck

Story E. Cunningham

Job interviews and salary negotiations have always been a sort of poker game. Now, in California, employers are required to show their hands, while candidates can keep their cards close to the vest.

The Salary Privacy Bill, AB 168, enacted by Gov. Jerry Brown on October 12, 2017, prohibits California employers from asking job candidates about their prior salaries, either orally or in writing, and prohibits employers from using an agent to get the information. The law applies to both public and private employers of every shape and size.

California is not the first to pass a law of this kind. San Francisco, New York City, Philadelphia, Delaware, Puerto Rico, and Massachusetts have already passed similar laws. The law has recently been challenged in Philadelphia by a lawsuit that argues that the law violates the First Amendment rights of local businesses.

What does this mean for employers? They will have to rewrite their job applications to remove the box requesting current salary information and will have to instruct recruiters and interviewers to not seek that information from applicants. They may have a much harder time gauging market trends for determining how much to pay employees, and might need to resort to hiring pricey compensation consultants which would be prohibitive to many small employers. If they do not want to lose out on a candidate who is in demand, they may offer more in salary than they otherwise initially would. The new law allows job candidates to bluff as to their current salaries, but if a candidate asks, employers must put their cards on the table and provide a pay scale for the relevant position.

Employees making top dollar at their current jobs might want prospective employers to know what they have been earning in order to give them an edge in negotiations. In that event, and if the applicant “voluntarily and without prompting” provides his or her current salary information, then and only then, the employer can use it in determining that applicant’s salary.

The new law is touted as an affirmative step toward closing the gender wage gap that has spanned generations. Its sponsors assert that if historically underpaid women are compelled to reveal what they are being paid, that information (which is arguably less than similarly skilled and experienced men), will perpetuate pay discrimination between the sexes. However, for employers trying to negotiate and determine how much to pay a job candidate, this new asymmetry of information has stacked the deck against them.

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