CalChamber-Opposed Bill on Governor’s Desk Could Increase Frivolous Litigation

The California Chamber of Commerce is urging the Governor to veto a bill that threatens only private employers with civil litigation for seeking an applicant’s prior salary and benefit information even though the applicant suffered no harm in compensation from the inquiry.

AB 1017 (Campos; D-San Jose ) precludes an employer from asking or requesting an applicant to disclose his or her prior salary or compensation, under the claim that employers will base any offer of compensation solely on the employee’s prior salary and perpetuate wage discrimination. Despite this claim, there are several legitimate, nondiscriminatory reasons why employers seek information regarding an applicant’s prior compensation.

Employers do not necessarily have accurate wage information on what the current market is for all potential job positions. In competitive industries, business competitors can utilize such information to lure talented employees from their workforce.

By requesting salary information, employers can adjust any unrealistic expectations or salary ranges to match the current market rate for the advertised job position. This adjustment has worked to the benefit of the applicant/employee.

Wage information can also be utilized as a reference regarding whether the employee’s expectations of compensation far exceed what the employer can realistically offer. Requiring both the applicant and employer to waste time on the interview process which, for highly compensated employees, could be lengthy, to then ultimately learn at the end of the process that the employee would never consider taking the compensation offered is unnecessary.

Moreover, the actual concern with regard to wage disparity should be what the final compensation is that the applicant is offered/paid compared to those in the same job category. The Labor Code requires an employer to provide equal pay for equal work, which Senator Hannah-Beth Jackson (D-Santa Barbara) is seeking to strengthen through CalChamber-supported SB 358.

Similarly, the federal Equal Pay Act also precludes employers from paying employees different wages for the same job based upon gender. The Fair Employment and Housing Act (FEHA) and Title VII preclude an employer from discriminating against an employee, including wages, on the basis of gender.

Accordingly, there are existing protections to preclude an employer from paying a female employee less, even if the employee’s prior salary was lower than her male counterpart.

An employer should not be subject to litigation under the Labor Code Private Attorneys General Act (PAGA) simply for inquiring into an applicant’s salary history or prior compensation when there is no ultimate harm to the applicant/employee. Notably, an employee can file a PAGA claim for any violation of the Labor Code, regardless of whether the employee suffered harm, with statutory penalties ranging from $100–$500 per employee, per pay period, with attorney fees.

This threat of litigation is totally unnecessary given that an employer’s inquiry into an applicant’s salary/compensation history has no harm; or, to the extent it does, is already adequately covered by existing law with regard to gender discrimination.

Action Needed

The CalChamber is urging businesses to contact the Governor and urge him to veto AB 1017.

Staff Contact: Jennifer Barrera