Hiring Post-Pay Secrecy Law

With Hawaii’s new Pay Secrecy law to take effect on January 1, 2019, have you updated your job application form and revised your hiring processes?

The New Pay Secrecy Law

Under Act 108, Hawaii’s Pay Secrecy Law will prohibit employers from:

  1. Inquiring into a job applicant’s salary history, and
  2. Relying on salary history in determining compensation for a potential hire.

Under the language of Act 108, “salary history” is defined broadly and includes prior salary and wage information, as well as benefits and other forms of compensation.

The new Pay Secrecy law also contains a few exceptions:

  • It does not apply to internal candidates;
  • An employer can still ask job applicants about their salary expectations; and
  • An applicant can voluntarily disclose their salary history, as long as they are not prompted by a prospective employer to do so.

In addition to Act 108, employers should also be aware of a decision by the Ninth Circuit Court of Appeals called Rizo v. Yovino, 887 F.3d 453 (9th Cir. 2018), which was issued earlier this year in April.  As discussed in a previous news digest article, the Rizo Court held that an employer’s reliance on an applicant’s salary history did not justify a wage differential under the Equal Pay Act.  Therefore, under Rizo, employers are cautioned against asking about and relying upon the salary history of a job applicant.

Recommended Employer Actions

Whether you have already made changes to your hiring process or are just starting to do so, we offer the following recommendations to remain compliant with the law.

Based on Act 108 and Rizo, employers should update their job applications, review their hiring and compensation practices and other relevant policies, and ensure adequate training for all employees involved in the recruiting and hiring process.

  • Application Form: Many standard application forms historically requested salary information.  Companies must remove all requests for salary history (but may still ask about “salary expectations,” if they wish to do so).  HEC has a sample job application form available for member use on our website.
  • Hiring Process:
    • Any written policies, practices, and forms pertaining to recruiting, hiring, or compensation should be updated accordingly.
    • These new laws are not just applicable to HR staff. Whether it’s a shift supervisor interviewing a sales associate, the CEO recruiting a CFO, or an analyst recommending a compensation structure, employers must ensure that anyone who participates in the hiring process knows:
      • They cannot inquire about an applicant’s prior salary information;
      • They cannot research an applicant’s salary history on their own using references or the Internet; and
      • They cannot rely upon an applicant’s salary history in determining salary, benefits, or other compensation (unless such information was voluntarily disclosed by the applicant).
    • Additionally, employers should be aware that these new restrictions apply during the entire hiring process, regardless of whether such discussions arise during a formal interview or casual conversation with a prospective employee.

Training:  It is likely that certain individuals who are involved in the hiring process (e.g. supervisors) are not currently aware of Rizo and Hawaii’s new Pay Secrecy Law, so it is incumbent on employers to provide them with adequate training.  HEC has created a short video for members’ use as well as FAQs to assist employers in their training efforts on this issue.

Depending on your organizational structure and needs, training can take many forms, including:

  • Memorandum – An employer could distribute a hard copy or e-mail memorandum to inform employees of the restrictions.
  • Meetings – Companies could also hold in-person meetings with HR personnel, supervisors, and any other individuals involved in the hiring process to discuss these new restrictions and address any questions or concerns.
  • Training Sessions – An employer could host training sessions and show employees HEC’s video in addition to training employees on appropriate versus inappropriate compensation discussions.

Effective Compensation Strategy

Competitive pay is essential to attract the talent needed for an organization to thrive.  Without knowing an applicant’s prior salary history, however, how can an employer determine what type of salary can be offered to a potential hire?  Employers can ask applicants about their salary expectations, but this will not necessarily elicit a helpful response. 

Accurate and timely review of market data is the key to maintaining the right balance between paying too little and paying too much.  HEC is currently the sole resource that compiles current salary information from Hawaii employers across various industries.  Although many websites advertise pay data, it is important to understand how the data was collected and analyzed to determine whether it is credible and current.  HEC conducts annual surveys to collect pay and benefit information directly from the human resources team of participating organizations.  This results in reliable data so employers can be confident they are offering a competitive compensation package, even without knowing an applicant’s prior salary history.

For more information on HEC’s salary surveys and other compensation services, please contact HEC’s compensation experts, Cathy Keaulani, Research & Compensation Services Manager (440-8845), or Susan Amuro, Research & Compensation Analyst (440-8809).

Resource Links:

Act 108, Hawaii’s Pay Secrecy Law
HEC Video on Pay Secrecy Law
HEC FAQs on Pay Secrecy Law
HEC Sample Application Form
Other HEC Application Resources
Compensation Consulting Brochure
Compensation Services

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