February 5, 2018
Organizations in hiring mode may have noticed that a New World Order in compensation is upon us. New laws and regulations are being implemented across the country that require most organizations to change their practices and protocols when it comes to understanding a candidate’s compensation history during the interview and application process.
These changes are intended to address equal pay for equal work considerations. The regulations attempt to even the playing field for applicants by ensuring that salary and compensation variables are benchmarked against the job itself and the market conditions. As such, obtaining applicants’ compensation history, an extremely common practice in the past, will be viewed as taboo. Instead, the regulatory intent is to take any bias, real or perceived, out of the equation.
Several states and municipalities have already enacted or will be implementing such regulations. They include New York, California, Delaware, Massachusetts, Oregon, Pittsburgh, New Orleans, and San Francisco. At least six other states are considering similar regulations.
The legal parameters of the new regulations and rulings tied to actual case law have not necessarily been tested yet; however, every human resources executive or organization in the hiring market better be prepared. There are penalties attached to violations, and some of these penalties can be punitive. For example, New York City cites fines of up to $125,000 and $250,000 for an unintentional violation and intentional malicious violation, respectively.
Many companies across the country have already taken action to mitigate their risk. At a minimum, these organizations have eliminated salary and wage history questions from job applications, as well as asked third-party recruiting companies they partner with to comply with the new regulations. At present, it’s unclear if an employment agency or search firm representing a hiring company could place the organization in jeopardy over practices that could be construed as a violation of the regulations.
Beyond that, organizations looking to hire should take these steps in light of the new regulations:
Companies dismissing these new developments because they don’t have operations in the affected markets would be wise to reconsider their position. Some of the regulations note that it’s not the location of the hiring organization that matters, but of the applicant. Consequently, an employer in North Dakota, for example, may be subject to such regulations if the company is hiring someone from New York City.
While there are still outstanding variables, the new laws and regulations related to compensation processes and disclosure stand to impact virtually every organization, regardless of size, industry, or other factors. Heed the steps outlined above to protect your business from unwanted risk and stay ahead of the curve.