What You Need to Know About the New Parity in Pay Ordinance

What You Need to Know About the New Parity in Pay Ordinance

San Francisco’s Parity in Pay Ordinance

Yesterday, San Francisco Mayor Ed Lee signed the Parity in Pay Ordinance, which prohibits employers from inquiring about or relying upon a job applicant’s salary history. Specifically, the Ordinance prevents employers who are required to do business in the City, including City contractors and subcontractors, from considering a job applicant’s prior salary in making hiring or salary decisions; from asking applicants about their prior salaries; and from disclosing an employee’s salary history without an employee’s authorization unless the salary history is publicly available.

Job applicants are, however, permitted to “voluntarily and without prompting” disclose their salary histories— and in that instance, employers are not prohibited from considering such voluntarily disclosed salary histories in determining applicants’ salaries.  The Ordinance, which takes effect on July 1, 2018, authorizes the Office of Labor Standards Enforcement (OLSE) to enforce its provisions and assess penalties upon finding a violation.

Closing the Wage Gap

This important legislation recognizes that the use of salary history in the job application process perpetuates preexisting gender-based wage inequalities. Indeed, “[w]hen employers make salary decisions during the hiring process based on prospective employees’ current or past salaries or require employees to disclose current or past salaries as part of the application process or during salary negotiations, women applicants often end up at a significant disadvantage. In effect, to the extent employers consider applicants’ salary history in setting salaries of new hires, historical patterns of gender bias and discrimination repeat themselves, causing women to continue earning less than their male counterparts and less than they would have earned, but for their gender.”

In August 2016, Massachusetts became the first state in the nation to pass a law similar to SF’s new Ordinance.  Although Governor Jerry Brown vetoed a proposed California statute banning consideration of a job applicant’s prior salary in 2015, another bill AB168 passed the state Assembly in May; passed the Senate’s Labor and Industrial Relations Committee in mid-June; and passed the Public Employment and Retirement Committee last week. If passed, AB168 would prevent California employers from seeking salary history information, including compensation and benefits, about an applicant for employment. However, existing law already specifies that prior salary cannot, by itself, justify any disparity in compensation such that California employers who seek salary history information for use in compensation decisions do so at their peril.

As San Francisco’s new Ordinance notes, the gender pay gap—even in the progressive Bay Area— is significant. In San Francisco, women are paid on average 84 cents for every dollar a man makes, while African American women are paid only 60 cents to each dollar paid to men and Latinas are paid only 55 cents to each dollar paid to men. And progress in narrowing the gap is not being made quickly enough. According to the National Committee on Pay Equity, the gender wage gap has closed by less than half a cent each year in the United States since 1963—the year that Congress passed the Equal Pay Act, the first law designed to prohibit gender-based pay discrimination.  Other cities and states should follow the lead of San Francisco and Massachusetts, and make employer inquiries into salary history, history.