Hawaii SB 2351: Law Protecting Compensation History

compensation historyThe 50th state in the union has passed a law prohibiting employers from inquiring about applicants’ previous wages earned. On Thursday, July 5, 2018, Hawaii Governor David Y. Ige signed into law Senate Bill 2351, which generally prohibits Hawaii employers from asking applicants about their compensation history. This SB 2351 legislature, like so many others nationwide, found that pay disparity persists between men and women who do similar work. It was also determined that in 2015, the gender wage gap in Hawaii stood at $0.16 on the dollar. This means that a full-time working female earned $0.84 to every $1.00 earned by their male counterpart.

The new law will affect any employer in the state with one or more employee. The statute follows previous states, counties, and cities who have passed similar pay equity laws.

Who is subjected to SB 2351?

Employers, employment agencies, and their agents are not allowed to ask an applicant about “current or prior wages, benefits, or other compensation.” Employers are also not permitted to search available public records or reports to confirm an applicant’s compensation history.

Employers may not rely on what the applicant made previously in factoring their wage with their new role except in the event that the applicant disclosed their wages voluntarily. There are exceptions to the law. Entities that are covered by state law may discuss the applicant’s compensation for the position without violating the statute. The law also states that “objective measure[s] of the applicant’s productivity, such as revenue, sales, or other production reports” are not off-limits.

In the event that an applicant discloses compensation history voluntarily, the employer may then use that information for determining the new salary as well as verifying the wage as part of the employment background check. This law is part of a growing trend that encourages employee dialogue about wages, and prevents employers from retaliating against employees who discuss their wages.

The law does not affect current employment “[a]pplicants for internal transfer or promotion with their current employer.” Following other pay equity laws, the new Hawaii law does not decipher if the individual resides in one state, while the job is in another state, and the company’s headquarters is in yet another state (or situations related to a mobile workforce).

In order to prepare for this law and stay in compliance with future equal pay restrictions, employers would be best served to:

  • Revisit their compensation structure across all positions
  • Evaluate Employment Application Materials
  • Revise interview scripts to be in compliance
  • Update any job duties/responsibilities
  • Confirm that any 3rd party vendor (background screening company) is in compliance
  • Always discuss different strategies to evaluate compensation and value positions

11 states so far have implemented laws prohibiting employers from asking or verifying previous wages:

  • California, Connecticut, Delaware, Hawaii, Massachusetts, Michigan, New Jersey, New York, Oregon, Vermont, and Wisconsin

Nine counties and cities so far have implemented laws prohibiting employers from asking or verifying previous wages:

  • San Francisco (CA), Chicago (IL), Louisville (KY), New Orleans (LA), New York City (NY), Albany County (NY), Westchester County (NY), Philadelphia (PA), and Pittsburgh (PA)