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Asking for salary history may be age discrimination

February 17, 2016

By Anthony Kaylin, courtesy of SBAM Approved Partner ASE

For many professionals, reaching six figures in salary is a high point of a career. Yet, ironically, if they lose their job for one reason or another, their salary history may price them out of a new job.  And who are these professionals with such high salaries?  Generally, those employees are those who are over 40 years of age.

Pete Edwards, who had a six-figure salary when he was laid off after 20 years as an electronics engineer, told The Wall Street Journal, “I’m unemployable now as a result of getting to the top of the tree.”

In the past, employers asked for salary history when it was time to negotiate a starting salary. But today, the request for salary history is a prescreening step.  When the applicant responds with either a range or an actual salary that is higher than the open position’s salary, it is a knockout answer; the applicant can be considered a “withdrawal-salary” when the application is dispositioned.

Recruiter Josh Rock of Fairview Health Services, a 20,000-employee health system in Minnesota, said that during the Great Recession recruiters used the compensation query as a quick way to cull the large field of candidates for open jobs.  “Why not figure out what’s going on sooner in the process than doing a dance?” he said.

“Unfortunately, some clients use salary as a pre-screening question,” said Susan Vitale, chief marketing officer at iCIMS Inc., a provider of recruiting software in Matawan, N.J. “So if the role tops out at $55,000 and they say they want $60,000, it might knock the candidate out of consideration” even if the person would be open to salary negotiations.

If HR uses this form of level-setting as a way to manage the expectations of applicants while dealing with the realities of salary budget constraints, it can easily be carried to a legally risky extreme. The approach “holds down wages because now the jobs are being filled by people with lower salary expectations,” said Thomas Kochan, a professor of employment research at the Massachusetts Institute of Technology’s Sloan School of Management. “We have a whole generation of people who are permanently adversely affected.”

The approach can also have a negative impact on the talent side of the equation.  By focusing on costs and hiring cheaper but possibly inferior talent, employers are becoming shortsighted.

Should employers be worried about asking for salary information upfront?  Maybe yes, maybe no, although federal contractors, whose practices are more transparent to the federal government, likely should.  Consider what could happen if the applicant turns the question back on the employer by asking how much the job pays. If the recruiter fails to respond and then eliminates the applicant as a “withdrawal-salary,” the employer could be leaving itself open to an age discrimination-and-retaliation claim or a pay transparency retaliation if a federal contractor. With the Obama administration’s push on pay transparency supporting it, the EEOC has been very aggressive in pursuing newer legal theories. This could be one of them.

Yet asking for salary history is not an automatic trigger for liability.   “[E]mployers can make financial decisions and it’s not necessarily age discrimination,” said Raymond Peeler, a senior attorney-advisor at the Equal Employment Opportunity Commission. “What an employee would have to prove…is that the employer is using the salary level as a proxy to disqualify all the older applicants.”

Many employers insist that an applicant who would take a hit in salary would not be as happy as an applicant who gets a boost in salary. “If someone wants $100,000 and settles for $75,000, they’re not going to be happy,” said Steve Gross, a compensation specialist and senior partner at consulting firm Mercer. The thinking is that such an applicant, if hired, could cause a contagion of dissatisfaction among other employees, resulting in a major hit on employee engagement and satisfaction levels.

In any case, government may force the issue.  Massachusetts has a bill running through its legislature right now that would ban asking questions about salary or salary range.

Employers making all salaries public may be one solution, but that will only work if all competitors in an industry do the same thing. If one or only a few do it, it gives business intelligence to competitors. But—and even if—everyone does it, it could lead to anti-trust issues on collusion to keep salaries low

The likely best approach is to discuss salary expectations early on but to not disqualify the candidate at that point.  Let the candidate decide.  However, if the employer fears that the employee would be a short-termer and use the job to jump to higher salary, it may be a disqualifier.  In either case, document the conversation and results.

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