As of January 29, 2024, the Biden administration has introduced groundbreaking new hiring requirements to enhance pay equity across federal agencies and contractors. To honor the 15th anniversary of the Lily Ledbetter Fair Pay Act, signed into law by then-President Barack Obama on January 29, 2009, President Joe Biden announced that the Office of Personnel Management (OPM) is issuing a new final rule to prohibit the consideration of an applicant’s previous salary in hiring and pay decisions.
This is a substantial move to dismantle long-standing barriers to fair compensation. It also has the benefit of being tried and tested elsewhere in the country – California has had similar regulations in place for most employers since 2018. Let’s look at how the new federal hiring rule will protect potential employees, the benefits it offers, and what workers can do if they believe their rights were violated during the hiring process.
New Rules Regarding Federal Hiring and Salary Histories
The OPM has finalized its rule regarding hiring new federal employees, stating that “federal agencies cannot consider an applicant’s non-federal salary history when setting pay for new federal employees.” Specifically, agencies cannot use prior pay at positions outside of federal service to set pay for new or returning hires.
Similarly, the Federal Acquisition Regulation (FAR) Council has released a similar proposal that would set new rules for all federal contractors and subcontractors operating primarily in the US. The Council’s proposal would bar covered contractors from requesting salary histories from prospective employees to determine compensation. Furthermore, even if a candidate volunteers this information, the contractors may not apply the information when setting compensation rates.
While the proposal has not yet been approved, it demonstrates the federal government’s ongoing commitment to protect all workers and act as a model employer for the nation. These actions are part of efforts to ensure fair compensation based on skills and experience, aiming to improve recruitment and job satisfaction and reduce turnover among federal workers and contractors.
California’s Inspiring Salary History Laws
These federal directives may have taken inspiration and guidance from similar directives that have been in place in California. The state’s Labor Code section 432.3 offers protections to workers by barring employers from asking about salary history. First brought into effect in 2018 by AB 2282, the law introduced several critical provisions aimed at reducing hiring discrimination:
- Salary History Inquiry Ban: One of the most notable aspects of section 432.3 is the prohibition of employers from asking job applicants about their salary history. This measure seeks to prevent the perpetuation of wage inequality, ensuring that salary offers are based on the job’s requirements and the applicant’s qualifications rather than previous earnings.
- Pay Scale Transparency: Employers are required to provide the pay scale for a position to an applicant upon reasonable request. This transparency helps applicants understand the compensation range and negotiate salaries more effectively, reducing the likelihood of wage discrimination.
- Clarification and Exceptions: AB 2282 and section 432.3 also clarify certain exceptions and provide detailed definitions to ensure the law’s effective implementation. For instance, while employers cannot inquire about an applicant’s salary history, they can discuss salary expectations, allowing for an open conversation about compensation without the risk of perpetuating past inequities.
As with the federal rules, California’s salary history law is intended to encourage wage equity by compelling companies to base offers on the job’s worth and the candidate’s abilities, helping to break the cycle of pay discrimination.
Benefits of Barring Prior Pay Consideration During Hiring
Barring employers from considering prospective employees’ prior pay during the hiring process is supposed to help reduce wage disparities and promote pay equity. This approach is intended to guarantee that salary offers are based on the role’s requirements, the candidate’s experience, skills, and the value they bring to the company, rather than their past compensation, which may have been influenced by discriminatory practices or pay inequalities. Theoretically, it benefits women and minorities, who historically have faced greater wage gaps, by offering a fair chance at receiving competitive salaries that reflect their qualifications and contributions.
The question is: does the practice actually work? While the federal rules are too new to have had a serious impact, California’s laws have much more support, and the answer is clear. Yes, prohibiting the consideration of prior pay during hiring benefits historically disadvantaged people.
Since its implementation, California Labor Code section 432.3 has had a significant impact on hiring practices within the state. Employers have had to revise their application and interview processes to comply with the new regulations, leading to more equitable hiring practices. By focusing on qualifications and job requirements rather than salary history, the law aims to narrow the wage gap and combat systemic discrimination.
Furthermore, the requirement for pay scale transparency empowers job applicants, providing them with crucial information to make informed decisions and negotiate fair compensation. This shift not only benefits individual workers but also promotes broader societal change towards wage equality and workplace diversity.
Experienced Legal Counsel for Victims of Hiring Discrimination
The OPM and FAR rules echo California’s AB 2282 and Labor Code section 432.3 in many ways, which is excellent news for workers. These bills and regulations mark a pivotal moment in the effort to eliminate hiring discrimination and promote equity in the workplace. By banning salary history inquiries and enhancing pay scale transparency, this legislation paves the way for fairer, more inclusive hiring practices.
Of course, laws only work if they are followed. It’s crucial for people protected by California and federal hiring requirements to understand their rights. If you believe that you have experienced discriminatory hiring or wage practices, you should discuss your case with an experienced employment attorney to learn if you can take legal action.
At the Law Offices of Todd M. Friedman, P.C., our skilled attorneys can help. We are prepared to represent you in hiring and pay discrimination cases in California and around the country. Learn more about how we can help you fight for the fair pay you deserve by scheduling your consultation today.
