New Jersey’s enactment of the Salary History Ban Law is one step in a series of legislative measures designed to address pay inequities.

On July 25, 2019, New Jersey enacted Assembly Bill 1094 (herein referred to as the “Salary History Ban Law”). Effective January 1, 2020, the Salary History Ban Law prohibits private employers from inquiring about a job applicant’s salary history, benefits and other compensation during the hiring process.

Salary History Bans

Consistent with the growing trend, New Jersey joins the ranks of many other cities and states that have enacted salary history bans in an effort to combat pay inequity. Jurisdictions with some form of salary history ban applicable to private employers include, but are not limited to:

• Alabama (effective September 1, 2019)
• California
• Colorado (effective January 1, 2021)
• Connecticut
• Delaware
• Hawaii
• Illinois (effective September 29, 2019)
• Maine (effective September 17, 2019)
• Massachusetts
• New Jersey (effective January 1, 2020)
• New York (effective January 6, 2020)
• Oregon
• Puerto Rico
• Vermont
• Washington
• San Francisco
• Albany, New York
• New York City, New York
• Philadelphia, Pennsylvania (not currently in effect due to legal challenge)
• Westchester, New York

New Jersey Takes Another Step Designed to Address Historical Pay Inequities

Proponents of salary history ban legislation believe that restricting access to an applicant’s wage history information will help narrow wage gaps by preventing employers from unintentionally perpetuating historic gaps in compensation. The view is that such bans will require employers to focus on hiring candidates based on experience and qualifications for the specific position without regard to how much they were paid at prior jobs. New Jersey’s enactment of the Salary History Ban Law is one step in a series of legislative measures designed to address pay inequities.

In 2012, the New Jersey Legislature amended the New Jersey Equal Pay Act to require notice to employees of their right to be free of gender discrimination in the workplace, including inequity or bias in pay, compensation, benefits or other terms and conditions of employment. On August 28, 2013, New Jersey amended the Law Against Discrimination (LAD) to include a ban on retaliation against employees who ask current or former colleagues for information about the job title, occupational category, rate of compensation (including benefits), gender, race, ethnicity, military status or national origin of any other employee or former employee. On January 6, 2014, the New Jersey Department of Labor and Workforce Development (NJDOL) published the Gender Equity Notice and accompanying regulations, requiring employers with 50 or more employees (regardless of whether those employees work in New Jersey or outside the state) to post and distribute the notice to each employee annually and upon request. On July 1, 2018, New Jersey again amended the LAD and expanded pay equity protections for New Jersey employees by imposing more stringent requirements on New Jersey employers pursuant to the Diane B. Allen Equal Pay Act.

Come January 1, 2020, it will be unlawful for an employer in New Jersey to:

• Screen a job applicant based on the applicant’s salary history, including, but not limited to, the applicant’s prior wages, salaries or benefits;
• Require that the applicant’s salary history satisfy any minimum or maximum criteria;
• Consider an applicant’s refusal to provide salary history information in making any employment decision; or
• Retain or consider salary history information inadvertently disclosed through a background check. (Note: Employers must notify vendors that salary history information is not to be disclosed in any background check requested for positions based in New Jersey.)

In addition to violating the Salary History Ban Law, it shall be an unlawful employment practice under the LAD for an employer to impermissibly screen an applicant in a protected class based on salary history or require that such applicant’s salary history satisfy any minimum or maximum criteria.

Exceptions to the Law

There are several, limited exceptions to the law. Employers may:

• Consider and/or verify salary history if an applicant voluntarily, without employer prompting or coercion, provides the employer with salary history;
• Request that an applicant provide the employer with a written authorization to confirm salary history, including, but not limited to, the applicant’s compensation and benefits, after an offer of employment has been made to the applicant that includes an explanation of the overall compensation package;
• Consider salary history information when considering an internal transfer or promotion;
• Consider salary history information that an employer has knowledge of due to an applicant’s prior employment with that same employer;
• Act in compliance with any federal law that requires disclosure or verification of salary history for employment purposes or to determine an employee’s compensation;
• Inquire about the terms and conditions of prior incentive or commission plans if the applicant is applying for a position with a commission or incentive compensation component, so long as the employer does seek or require the applicant to disclose the applicant’s earnings under any plans with a prior employer; and
• Communicate with applicants about wage or salary rates set for the job by collective bargaining agreements, the civil service law or other laws, and pay the set rates if the applicant is hired.

Employers who employ workers in various states in addition to New Jersey may continue to ask about salary history on job application forms, if such states do not have their own salary history bans. For positions located in New Jersey (in whole or substantial part), employers can either customize their online and paper job applications by eliminating the salary history portion of the application form or including explicit instructions before that section making clear that applicants need not complete the salary history section of the application.

Penalties for Violations of the Salary History Ban Law

Employers who violate the Salary History Ban Law will face civil penalties imposed by the NJDOL in an amount up to $1,000 for the first violation, $5,000 for the second violation and $10,000 for each subsequent violation.

What This Means for New Jersey Employers

Between now and January 1, 2020, the effective date of the Salary History Ban Law, New Jersey employers should examine the way they screen, interview and negotiate with candidates for positions physically located in New Jersey (in whole or in substantial part). Employers should review their hiring practices and modify their policies and procedures to ensure compliance with the Salary History Ban Law and the LAD. All persons responsible for interviewing applicants and hiring new candidates should be trained on the legal implications of certain hiring practices to prevent violations of the Salary History Ban Law, the imposition of hefty monetary penalties associated with such violations, and the potential for exposure under the LAD.

For Further Information

If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group, or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.