31 Jan A.B. 138: An Emerging Compensation Trend Around Pay Transparency & Equality
By Melissa Cueto at Vivient Consulting
Effective January 1, 2018, California joined a handful of other cities and states to pass A.B. 138, a law barring employers from seeking previous salary information from prospective employees, or relying on previous salary information when making an offer.
Assembly Bill 138 (“AB 138”) specifically prohibits employers from requesting previous salary information about prospective employees during any point in the pre-employment process, including during application, interview, and job offer and salary negotiations. This prohibition includes utilizing outside agents to procure said salary information. Exceptions are made for government employees whose salary is already public record. Additionally, AB 138 requires California employers to provide pay scale information to prospective employees upon “reasonable request.”
The passage of AB 138 follows the start of a larger trend toward legislation intended to support pay equality and transparency. AB 138, and similarly designed legislation, aims to prevent continuous, inadvertent pay discrimination by obligating companies to pay salaries based upon skill, experience and current company pay ranges. The legislation also aims to create greater pay transparency, granting prospective employees valuable salary information to utilize during the negotiation process.
California’s Assembly Bill 138 does not prohibit a candidate from voluntarily, and without prompting, providing previous salary information. However, organization’s may not rely on this exception and must be diligent in complying with the law.
As pay equality legislation becomes law and we begin to see challenges work their way through the court system, we will see clarifying opinions and rulings to provide additional guidance to employers. At present time, little information is available regarding what may constitute a “reasonable request” or what organizations must provide as a response to such request when they do not have established pay scales or ranges for the position.
Due to the broadening popularity of pay equality legislation, organizations with multi-state operations are encouraged to consider making uniform salary policy changes. We are also seeing an increase in requests for salary benchmarking studies and the development of salary range structures in order to have a consistent and defensible process for salary administration. We encourage companies to work with their legal counsel to review and amend existing pre-employment documentation, such as applications, and to educate their managers who interview and recruit prospective employees to ensure compliance with the law.