New Legislation to Promote Equal Pay and Suppress Discrimination

Contributed by Richard Cherpak

         The issue over whether a potential employer’s interview questions regarding an applicant’s previous salary should be banned has sparked an intriguing debate that will impact the legal and business landscape. These laws will not just impact pay equity, but will also effect the number of claims for gender discrimination, age discrimination, and discrimination based on race or national origin.

            Massachusetts, Philadelphia and New York City have all recently passed laws prohibiting employers from asking questions regarding job applicant’s current or previous salary. The ban is expected to come into effect in Massachusetts in the summer of 2018. The statutes are being implemented to encourage equal pay by making employers configure salary numbers based on job requirements and market salary rates for the position being hired instead of the applicant’s past or current salary. Back in early April, the New York City Council approved New York City public advocate Letitia Jame’s bill that prohibits private and public employers from asking job applicants about their past and current salary during the interview process. The bill, which was signed by Mayor Bill de Blasio back on May 4, also prohibits employers from factoring in an applicant’s previous and current salaries when determining what salary they are going to offer. Legislation of this nature has been met with much controversy in Philadelphia. Earlier this month, the city of Philadelphia announced that it would wait to enforce the legislation until a federal judge decided on a petition to block the legislation from the Chamber of Commerce for Greater Philadelphia.

            Significantly for employers, in New York City, there are going to be severe penalties for violating the ban. If the city feels that the employer violated the ban in a malicious and willful manner, she or he may be held liable in fines of up to $250,000.

            Although the penalties for violating the ban are severe, there are a few exceptions to the law. One such exception allows for applicants and potential employees to use their own discretion in deciding whether or not to share their salary history. Accordingly, once employers receive this information from the applicant voluntarily, they may lawfully take it into consideration when offering a salary number.

            The potential benefits of implementing such a ban include that it may create more transparency between employers, employees and prospective employees when negotiating offers and raises, which in turn, may ease any tensions over lack of compensation that an employee may feel. By forcing employers to take more of an objective market-based approach when they are deciding what salary figure they are going to offer to an applicant, it becomes less likely that an applicant will claim unequal pay, or gender or racial discrimination. Using a market based approach allows employers to look at the standard market rate for what an employee of a similar position and skill level at another company makes while still providing the employer with some discretion what actual salary their prospective employee should earn based on their own individual skill set and experience.

            Although there is a strong argument for implementing this law, there is also a compelling argument against it. One argument currently being made by the Chamber of Commerce of Greater Philadelphia, which is representing around 600,000 businesses, is that implementing such a ban would violate free speech rights of employers and make it more difficult for companies to recruit top talent. The lawsuit in Philadelphia says that employers’ use of wage history information is a valuable tool in assessing whether they can or cannot afford to hire a particular candidate. They further contend that it is used to help businesses figure out an appropriate salary for a particular job. Another potential downfall of implementing such a ban is that it could expose businesses to major lawsuits opening the flood gates for a overwhelming stream of litigation. Say for example that a company leaves a question on their application regarding salary information, this could lead an applicant to file suit against the company. Additionally, there may be confusion and debate over the interpretation of a salary based question on an application because a question that the employer has regarding one’s salary expectations may be misconstrued by a potential employee or applicant to be a question regarding one’s salary history.

            According to the National Conference of State Legislatures, implementation of legislation of this nature is likely to expand across the country and continue as this year alone, 21 other states and Washington D.C. have proposed laws that would forbid questions regarding salary history. These states include: California, Connecticut, Delaware, Georgia, Iowa, Idaho, Illinois, Maryland, Maine, Mississippi, Montana, North Carolina, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Texas, Virginia, Vermont, and Washington.

Department of Labor Proposes to Double Income Level for Salaried Employees to be Exempt From Overtime and Minimum Wage

On July 6, 2015, the U.S. Department of Labor announced its proposal to double the income level required for an employee to be exempt from overtime and minimum wage requirements. It is important to note that this is merely a proposal, and not an official rule. But it demonstrates how serious the DOL is as it relates to updating the exemptions. Also it should put employer’s on notice to pay attention as these changes could significantly impact business of all shapes and sizes.

Under the new proposal, the minimum weekly salary for exempt employees, presently $455 per week or $23,660 per year (http://www.dol.gov/whd/overtime/fs17a_overview.pdf), would increase to the 40th percentile of weekly earnings for full-time salaried workers in the United States, estimated to be $970 per week or $50,440 per year in 2016. Further, the minimum annual salary required for the Highly Compensated Employee exemption, presently $100,000 per year (http://www.dol.gov/whd/overtime/fs17h_highly_comp.pdf), would increase to the 90th percentile of weekly earnings for full-time salaried workers in the United States, which is currently $122,148; and these compensation requirements would automatically increase annually in the future based on a yet to be determined formula. The DOL also announced that it is considering, revising the job duties required for exempt employees, and whether non-discretionary bonus or incentive pay should be considered toward the minimum salary requirement for Highly Compensated Employees.

If you have any questions or concerns regarding how these changes can impact your business, call Gilbert Law Group today, (631)630-0100.

Changes to FLSA Executive Overtime Exemption Could Mean Significant Raises

Many executive and professional employees who have been exempt from federal minimum wage and overtime regulations may soon qualify to be compensated for overtime. Indeed, the low salary requirement for the executive overtime exemption may soon be a thing of the past. In late November, the Department of Labor released its Fall 2014 Agency Rule List. President Obama has made clear his intention to modernize and streamline FLSA regulations for executive, administrative, and professional employees. The FLSA provides for overtime exemptions (and minimum wage exemptions, in some cases) for employees who are employed in a bona fide executive, administrative or professional capacity, or in the capacity of an outside salesperson. Soon, if employers wish to avoid paying overtime to their executive, administrative, or professional employees, they may have to increase their salaries significantly.minimum wage and overtime

The updated regulations will increase the $455 minimum weekly salary threshold for exempt executive workers. At $455/week, workers earning just $24,000 annually currently meet the minimum salary requirement. The White House has said that just 12% of salaried workers now fall below this threshold, compared to 65% in 1975 when the regulations set a $250/week minimum.  New York already requires employers to pay higher minimums to meet the exemption ($600 in New York, increasing to $675/week by 2016). It has been reported that the Obama administration is planning on setting the minimum salary for the overtime exemption at $42,000 per year (just over $800/week).

A substantial increase even to the anticipated $42,000 would have the most impact on production, service and retail industries that have substantial numbers of low paid supervisors.

To learn more about what this means for your business or compensation package call Gilbert Law Group today: (631)630-0100.

Gilbert Law Group – 425 Broadhollow Road, Suite 405, Melville, New York 11747