The Bottom Line
- New Jersey’s salary history ban makes it an unlawful employment practice for companies to screen job applicants based on salary history, require applicants to disclose their salary history in the hiring process or consider as part of any employment decision a job applicant’s refusal to volunteer compensation information.
- Employers with operations in New Jersey are advised to review their hiring practices, including job applications, background check protocols, interview guidelines and information requested from recruiters to ensure compliance with the new law.
Joining an expanding list of states and cities that have implemented restrictions on the use of salary history in the hiring process, including New York State, New York City, and California, New Jersey recently passed its own salary history inquiry ban.
The New Jersey law, which becomes effective on January 1, 2020, provides that employers may not:
- Screen a job applicant based on the applicant’s salary history; or
- Require that an applicant’s salary history satisfy any minimum or maximum amount.
The law allows a prospective employer to consider and verify compensation history when an applicant voluntarily — without prompting or coercion — discloses his/her salary history to the employer. However, the law makes clear that an applicant’s refusal to volunteer compensation information may not be considered in any employment decisions.
The law also allows an employer to request written authorization from an applicant to confirm salary history, including compensation and benefits, after the employer has extended an employment offer that includes an explanation of the overall compensation package being provided for the role.
There are several exceptions outlined in New Jersey’s legislation where the salary history ban does not apply. These scenarios include:
- Internal transfers or promotions, or use by an employer of prior knowledge about an employee’s compensation obtained as a consequence of the person’s previous employment by the same employer;
- Actions taken by an employer under any federal law or regulation that expressly requires the disclosure or verification of salary history for employment purposes or requires knowledge of salary history to determine an employee’s compensation;
- Verification of non-salary related information through background checks. However, an employer must state that salary history should not be disclosed when requesting information from a background check provider, and if such information is disclosed, the employer may not retain or consider that information in determining compensation for the job; and
- Inquiries about an applicant’s previous experience with incentive and commission plans. However, the employer may not require an applicant to report information about his/her earnings from incentive and commission plans, and may not inquire about an applicant’s experience with such plans unless the employer includes an incentive or commission component as part of the total compensation program for the role.
For employers and applicants who work with recruiters, the law provides that if a job applicant discloses salary history details to an employment agency, the agency may only share this information with the potential employer if the applicant has provided express written consent.
The law also confirms that if a company operates in at least one state outside of New Jersey and includes a question about salary history on the job application, the application must specify that candidates for jobs with a physical location in whole (or substantial part) in New Jersey are instructed not to answer the salary history inquiry.
Finally, any employer that violates the law can be liable for civil penalties ranging from $1,000 for the first violation through $10,000 for multiple violations.