New California Law Fills in the Blanks of Salary History Ban

Last week, California enacted new legislation updating the prohibition on employers inquiring into the salary history of their applicants and the requirement that employers respond to applicants’ requests for the pay scale for positions. This law, enacting Assembly Bill No. 2282, clarifies key provisions in Labor Code section 432.2 regarding employers’ obligations, which were left undefined in the bill that added Section 432.3 to the Labor Code last year.

Last year’s bill, which we discussed here, required California employers to provide “applicants” with the “pay scale” for a position upon “reasonable request.” Until now, these three terms were not clearly defined. The new law offers the following clarifications:

  • The term “applicant” or “applicant for employment” refers to an external individual seeking a position with the employer. It excludes current employees.
  • The term “pay scale” means a salary or hourly wage range, but does not include bonuses or equity ranges.
  • The term “reasonable request” is a request made only after an applicant has completed an initial interview with the employer. Theoretical interest, or one feigned by plaintiffs’ attorneys and competitors, does not suffice.

The new law also clarifies existing law by expressly allowing employers to inquire into applicants’ salary expectations for a desired position. Employers are still prohibited from inquiring into applicants’ salary history.

Additionally, the new law answers an important question relating to equal pay. It provides that prior salary may not justify any disparity in compensation between employees of the opposite sex or of different races or ethnicities, subject to a key exception: an employer may make a compensation decision “based on a current employee’s existing salary, so long as any wage differential resulting from that compensation decision is justified by one or more of the[se] factors”: a seniority system, merit system, or other bona fide factor other than sex, race or ethnicity.

California’s salary history ban aligns with an increasing number of states with similar provisions. Moving forward, employers should pay close attention to these new guidelines and review their hiring policies and practices accordingly.