Pay Disclosure Is a Brake on Gender Pay Parity

California employers may not require pay disclosure during the job application process. The rationale for this prohibition is that pay disclosure by women during salary negotiations may very well anchor the new pay rate to a past practice of gender bias.

The first step by California to address the gender pay gap was the California 2015 Fair Pay Act. Gender Bias in Law Firms. However, the 2015 Act only addresses “unfair pay” for substantially similar work. The Fair Pay Act doesn’t operate proactively at the salary negotiation stage to discourage pay discrimination.

California Governor Jerry Brown has signed a law designed to break the disparate pay track for women compared to men. Labor Code Section 432.3 effective January 1, 2018. [The Statute] Section 432.3 will prohibit an employer from asking for the applicant’s past wage rate. Indirectly, this law will likely lift the salaries of both male and female from being anchored to the employee’s earning history. While not stated in the statute, the implied new economic benchmark for setting salary will be an employer’s perception of the need for the employee’s skills and knowledge, and the overall competitive market for those skills.

How Labor Code Section 432.3 Will  Prohibit Pay Disclosure –  A Case Illustration:

Amy is a systems engineer from a good school and outstanding work history with big firms. After resigning from her last employment to care full-time for a sick child, she returned to the workforce. She registered with an employment agency. The employment agency application asked for her work history and earnings per annum at each employment. Later, when the Company hired Amy as a full-time permanent employee, the interviewer asked her what she was making at her last full-time job. She was also required to sign two authorization forms that allowed former employers to provide her new employer with her prior earnings. One authorization was for a background check company, and the other was for past employers.

When Amy asked for the pay range for the position during the application process, the human resources representative dismissed the request. “We pay competitively. We’ll get to that if we call you back for an interview,” she said.

Amy provided the salary information, thinking she had no choice if she were to have a chance of being hired. At about the same time, the company also hired a male doing most of the same work as Amy.

The Company’s written policy was that salary levels were not to be discussed. But Amy was curious. She approached her male colleague and asked him to disclose his starting salary. He declined, and reported Amy to H.R. The Company fired Amy for violating company policy.

Involuntary Pay Disclosure in Violation of California Labor Code Section 432.3.

  • The company illegally used application forms seeking Amy’s salary history.
  • The company illegally used an “agent” to obtain Amy’s salary history: a background check company and the temporary employment agency.
  • The company official interviewing Amy asked illegally for her last rate of pay.
  • The company and its agents illegally required Amy to sign consent forms to release salary information under circumstances of apparent duress, and without informing her of her legal right to decline to provide the authorization.
  • The company’s policy prohibiting employees to exchange salary information violates both state and federal law. Federal labor law protects “concerted activity” by employees. State statutes specifically allow employees to discuss salary among themselves without employer discipline. [CA Labor Code Sec. 1197.5(j)(1); CA Labor Code Section 232; Automatic Screw Prods. Co., 306 NLRB 1072 (1992)].
  • The prospective employer’s refusal to answer Amy with the disclosure of the position’s pay range violated Section 432.3.
    Finally, terminating Amy’s employment because she discussed salary levels would be illegal because of the public policy behind the statutes allowing such freedom of disclosure.

Conclusion:

Pay parity for the genders is an important goal. Employees now have the right to decline to answer questions about prior pay rates. A female job applicant can now also affirmatively ask for the pay range for the position she seeks, and an employer must provide the range. Although Section 432.3 does not create a direct action by the employee to sue the employer, indirectly a violation of 432.3 may support a suit for “wrongful termination in violation of public policy” and as evidence for a separate case of gender discrimination.