Delaware Law Will Soon Prohibit Asking Applicants About Compensation History
Effective December 14, 2017, Delaware law will make it unlawful for employers to ask applicants about compensation history. Following in the steps of recently enacted laws in, for example, Connecticut, Massachusetts, New York City, and Philadelphia – though the Philadelphia law remains on hold mired in legal challenges – the law seeks to narrow the gender wage gap by stopping perpetuation of pay differences based on pay history. Pretty straightforward rationale.
While most laws have tracked the language of previously-enacted laws very closely (why reinvent the wheel), Delaware’s wage history law has several subtle, yet key differences. From top to bottom, here is what employers need to know, including how Delaware’s law is a slight departure from laws you may have previously learned about.
The law prohibits employers from asking applicants about their compensation history, which broadly includes asking about salary, benefits, and various other forms of compensation. The law also applies to an employer’s agents, including recruiters, staffing firms, etc.
Under the law, an employer will only be permitted to inquire about past compensation after it extends an offer of employment which includes the compensation terms. At that time, an employer will be permitted to request compensation history, but only for the purpose of verifying prior pay; i.e., — employers will not be permitted to thereafter modify the offered compensation solely based on the newly-learned information. Nothing in the law prohibits employers from discussing (or negotiating) compensation terms, including asking about the applicant’s expectations and pay requirements.
So far, the Delaware law is not unlike the others that came before it. But here are three notable differences. First, unlike other laws, employers are actually permitted to establish compensation terms of the new position on the basis of pay history, if the applicant voluntarily discloses the information. Second, under Delaware law an employer will not be liable for the acts of its non-employee agents (meaning third-parties, like outside recruiters), provided the employer can show it adequately informed the agent about the requirements of the law. Third, while most laws count each unlawful question, and each harmed individual, as one “violation” for the purposes of tallying the penalties, this law provides that employers will only rack up one violation per position.
Finally, there is a fourth difference – the law is very slim, leaving several unanswered questions (the entire Bill is1.5 pages long, if that). Perhaps the most important omission: the law does not define “employer” or “employee,” making it unclear how far the law will reach. But if interpreted as broadly as the widest-reaching law under Delaware Title 19 (the Employment and Labor Code), then it will apply to both: (a) any position which calls for the performance of work, or a portion thereof, in Delaware; and (b) any employment agreement (including an at-will agreement) which is “made” in Delaware.
Part (a) is easy. Part (b) requires application of complex and arcane legal principles. Suffice it to say that a contract will likely only be deemed “made” in Delaware if the office which is doing the hiring is physically located in Delaware. Ignore where headquarters are located and the state of incorporation. Look only at where the hiring office is located – this will tell you where the agreement is “made.” But to stress – this is as far-reaching as the law could be applied: we don’t yet know whether it will be interpreted this broadly.
The Delaware Department of Labor is intending to publish various guidance materials on its website over the next few months and to engage in outreach and education efforts. We suspect that the terms “employer” and “employee” will soon be clarified. We will of course continue to keep our Members posted and, as always, our hotline and staff of attorneys are here to assist Members with any questions about the law, including assisting with compliance planning, and taking steps to inform outside recruiters about the law’s requirements (in part to make use of the law’s immunity provision for unlawful acts of the agent).
Ciana Williams, Esq., SPHR
MidAtlantic Employers’ Association
*This Alert is provided for general informational purposes only and does not constitute legal advice.