New Jersey Employers Face New Salary History Ban

On July 25, 2019, New Jersey passed a new law effective January 1, 2020 that prohibits employer inquiries into a worker’s wage and salary experience. New Jersey employers are no longer permitted to use a prospective employee’s salary history as part of the consideration to hire. This is the latest step in promoting pay equality in New Jersey.

The law prohibits employers from assessing new job applicants based on their prior wages, including salaries or benefits and requiring that an applicant’s salary history satisfy any minimum or maximum criteria. While companies are not permitted to require applicants to provide this information, the law does not forbid individuals from giving salary history voluntarily to a prospective employer or employment agency. If the employer receives this information, without prompting, it is permitted to use it in determining compensation for a newly hired employee. Furthermore, an employer is still permitted to acquire salary history information that is publicly available, but the employer shall not retain or consider that information when determining the salary, benefits, or other compensation of the applicant unless the applicant provides the information voluntarily without prompting or coercion from the prospective employer. However, employers cannot hold an applicant’s refusal to volunteer or provide this information in any employment decision.

Additionally, when an applicant voluntarily provides salary history (including experience with incentive and commission plans) to an employment agency, the employment agency may use the information for its own purposes to assist the applicant in searching for and identify new employment opportunities but may not share that information with potential employers unless the applicant gives express written consent.

There are some exceptions to the new law. An employer may take action when a federal law or regulation expressly requires the disclosure or verification of salary history for employment purposes, or requires knowledge of salary history to determine an employee’s compensation. An employer is still permitted to obtain or verify a job applicant’s disclosure of non-salary related information when conducting a background check of a job applicant as long as the employer specifies that salary history information is not to be disclosed. If salary information is disclosed notwithstanding, the employer shall not retain the information or consider it when determining salary, benefits, or other compensation of the applicant. Likewise, if the employment opening with the employer includes an incentive or commission component as part of the total compensation package, then an employer is permitted to inquire about an applicant’s previous experience with incentive and commissions plans and the terms and conditions of the plans as long as the employer does not seek or require the applicant to report information about the amount of earnings in connection with the plans.

The law affects new hires and does not apply to internal transfers or promotions at a current workplace or an employer’s use of previous knowledge obtained as a consequence of proper employment with the employer. The law also does not affect the consideration of employees’ incentives or commissions as part of a total compensation program. After an employer has extended an offer that includes an explanation of the overall compensation package, an employer can request an applicant to provide a written authorization to confirm salary history (including compensation and benefits). An employer is still permitted to offer a job applicant information regarding wage or salary rates set for that position by a collective bargaining agreement or civil services or other laws, or from paying those rates if the applicant is hired. Employers who do business in other states as well as New Jersey may include questions about salary history on employment applications provided that, immediately before the salary history inquiry, the application states that an applicant for a position of which the physical location will be, in whole or in substantial part, in New Jersey is instructed not to answer the salary history inquiry.

Violations of this law are punishable by a fine of $1,000 for the first offense, $5,000 for a second offense and $10,000 for a third or subsequent offense, which must be paid to the New Jersey Department of Labor and Workforce Development.

Additionally, if the applicant is a member of a protected class under the New Jersey Law Against Discrimination (“NJ LAD”), N.J.S.A. 10:5-12, the employer may face further violations. The Law included amendments to the NJ LAD. If a job applicant is a member of a protected class under the NJ LAD, the amendments establish the following as an unlawful employment practice:

(1) To screen a job applicant based on the applicant’s salary history, which includes but is not limited to prior wages, salaries, or benefits; or

(2) To require that the applicant’s salary history satisfy any maximum or minimum criteria.

These new claims under the NJ LAD would not be subject to punitive damages.

It is advisable that Employment Contracts and Job Application Templates be reviewed and updated to comport with the new statute. Counsel should be consulted for specific legal advice.

This summary is for informational purposes only and is not intended to constitute legal advice. This information should not be reused without permission.

[1] Minor amendments to the NJ LAD were also passed that include minor language changes to N.J.SA. 10:5-12.1 (forced retirement) and N.J.S.A. 10:5-17 (findings and conclusions of directory), and N.J.S.A. 10:5-27.1 (attorneys’ fees). These amendments added clarification without modifying the substantive requirements.