A new law prohibits employers from asking applicants about salary history and institutes serious consequences for doing so.

Effective Jan. 1, 2020, it is now an unlawful employment practice in New Jersey to screen job applicants based on the applicant’s salary history, including, but not limited to, prior wages, salaries or benefits.

Additionally, according to this newly adopted statute, an employer shall not require the applicant’s history to satisfy a minimum or maximum criteria for employment.

While this legislation was passed in July 2019, this concept is nothing new to the Murphy administration. On Feb. 1, 2018, Gov. Phil Murphy signed his first executive order seeking to ensure pay equality by prohibiting the inquiry into salary histories by prospective state employers. Executive Order #1 expressed concern over wage gaps based on gender and/or race and/or national origin. California, Massachusetts, Delaware, Oregon, and several cities, including New York City, Philadelphia and San Francisco, all have enacted similar laws or ordinances. The aforementioned New Jersey legislation expands the governor’s Executive Order #1 to include all employers, not just state employers.

Law is Likely Here to Stay While there is always the possibility of litigation challenging this legislation, the law is likely here to stay. On Friday Feb. 6, 2020, the Third Circuit Court of Appeals, to which New Jersey federal court decisions are appealed, upheld a challenge to the similar Philadelphia ordinance. The Philadelphia ordinance contained an inquiry ban on employers asking about an applicant’s previous salaries or wage history and also prohibited employers from relying on any salary information it learns about during the setting or negotiating of the prospective employee’s salary. However, only the inquiry provision was before the Third Circuit. The Third Circuit decision overturned a preliminary injunction issued in district court, which held that the law infringed on the First Amendment rights of employers to free speech. The Third Circuit held that the law did not infringe on the employer’s rights because the law was “narrowly tailored” to address a substantial government interest — namely pay equity.

All personnel involved in hiring must become familiar with this new law as there are significant monetary and equitable sanctions for violations of the act.

In administering personnel matters, an employer may consider salary history in determining salary, benefits and other compensation for the applicant and may verify the applicant’s salary history only if the applicant voluntarily and without employer prompting or coercion, provides the employer with his or her salary history. The law is very clear that an applicant’s refusal to volunteer compensation information shall not be considered in any employment decision.

Several exceptions to the prohibition have been written into the law. One such exception includes applications for internal transfers or promotions within the employee’s current employer. Additionally, use by the employer of previous knowledge obtained as a consequence of prior employment with the same employer is also permitted.

Moreover, where consideration of an applicant’s past salary or benefits is expressly required by federal law or regulation for employment purposes or requires knowledge of salary history to determine an employee’s compensation, said consideration is also permitted. Notably, nothing prohibits an employer from acquiring salary history information that is publicly available. However, in this case, the employer shall not retain or consider that information when determining the applicant’s salary and benefits unless the applicant voluntarily provides the employer with a salary history.

Employers are warned that violating this law will result in a finding of an unlawful employment practice by the New Jersey Attorney General’s office, which could result in such remedies as hiring, reinstatement or upgrading of an employee with or without back pay, as well as awarding attorney’s fees in some cases. Hiring personnel must also review job announcements and employment applications to ensure that the documents do not seek the salary or benefits history from the applicant — especially if using multistate documents containing boilerplate language.

Employers must also be aware that they cannot share the salary or benefit history of an employee with another employer who may make an inquiry unless the applicant has expressly consented to the same. Employers could be subject to civil penalties of $1,000 for a first violation, $5,000 for a second violation and $10,000 for each subsequent violation for sharing salary information with other potential employers without the express consent of the applicant.

It is very important that school districts review this law closely with their board attorney to ensure that district hiring practices are compliant with this new law. As further guidance from the court system and the New Jersey Department of Labor and Workforce Development are provided, NJSBA will provide that information to its members.

Kathleen Asher is an NJSBA counsel.

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