DON’T Show Me the Money: New Delaware Law Forbids Asking About Compensation History
Delaware, striving for the salutary goal of eliminating pay disparities between male and female employees, has enacted a broad new prohibition on pre-employment questions about an employee’s compensation history. Under the law, which went into effect on December 14, 2017, an employer cannot screen applicants based on past monetary wages, benefits or other forms of compensation. Inquiring into the compensation history of a prospective employee from that applicant or current or former employer is likewise prohibited.
The sponsors of the law noted that the practice of inquiring into a prospective employee’s compensation history “perpetuates disparities in pay based on gender from one job to another.” By effectively banning this practice, Delaware seeks to reduce or eliminate future gender-based disparity by eliminating the perpetuation of past disparity.
The prohibition on inquiries regarding past compensation is not limited to questions directed to the prospective employee, but extends to previous employers as well. Additionally, the law goes beyond forbidding questions related to past salary and wages, and likely extends to questions regarding the applicant’s “fringe benefits” history, such as vacation time, health insurance, life insurance, retirement contributions and the like.
The law also establishes particularly onerous penalties. A first offense is punishable by a fine of anywhere from $1,000 to $5,000, and each subsequent offense carries a fine of at least $5,000 and no more than $10,000. Also, there is only a narrow, limited exception to the penalties provided for in the statute. A non-employee agent, such as a recruiter or staffing company, that works for an employer and asks an impermissible question will not subject the employer to the statute. However, an employee agent will. So, if a company uses its own personnel and those personnel ask impermissible questions, the employer and the personnel asking the questions can be penalized under the statute. Also, discriminatory motive is irrelevant; an employer who asks an impermissible question will be fined, regardless of discriminatory intent or animus.
It is important to note, however, that employers are permitted to discuss “compensation expectations” so long as no inquiry is made into the prospective employee’s compensation history. Furthermore, the law allows an employer to obtain this information after an offer of employment has been extended and accepted by the applicant “for the sole purpose of confirming the applicant’s compensation history.”
In light of the new law, Delaware employers would be wise to omit from their hiring processes any reference to an employee’s compensation history. The penalties are potentially significant, and the statutory scheme is entirely unforgiving.
