Hawaii Catches the Wave, Bans Salary History Inquiries

On July 5, 2018, Hawaii Governor David Ige signed Senate Bill 2351, thereby enacting a state law prohibiting employers from inquiring into an applicant’s salary history. This adds Hawaii to the continually growing list of states prohibiting such inquiries.

The new law is set to become effective on January 1, 2019, and covers more than just inquiries into prior salaries. It also addresses employers’ reliance on prior salary history information, how employers can respond to applicants’ voluntary disclosures, its application to current employees, and remedies for violations of the law. Specifically, employers, employment agencies, and their agents are prohibited from inquiring about an applicant’s “current or prior wage, benefits, or other compensation.” Moreover, employers cannot take it upon themselves to research this information. Like similar laws in other states, Hawaii’s salary history ban prohibits employers from relying on an applicant’s salary history in formulating the applicant’s salary or compensation package. If an applicant voluntarily and without prompting discloses salary history to an employer, the employer may consider salary history in determining salary, benefits, and other compensation for the applicant, and may verify the applicant’s salary history. While Hawaii’s law permits employers to consider salary history under these specific circumstances, companies may want to be cautious if doing so, as there are still risks associated with using this information at all. Understandably, current employees are specifically excluded from the law. While there is no separate and distinct remedy for violations of the new law, Hawaii did amend its nondiscrimination law to provide the same processes and remedies for violations of the new law as it does for other discrimination claims.

Importantly, the law outlines specific activities that are not in violation of the salary history ban. For example, it permits employers to discuss an “applicant’s productivity, such as revenue, sales, or other production reports.” The law does not penalize employers that conduct background checks to verify non-compensation related information resulting in the disclosure of compensation information as long as such information is not used to set the applicant’s salary.

As a result of this law, Hawaii expects employees to more freely discuss their compensation and assist in creating a dialogue with their peers and employers. Accordingly, the law prohibits retaliation against employees who discuss their compensation or ask about others’ compensation.

Like similar statutes of other states, Hawaii’s salary history inquiry ban leaves several questions unanswered for employers. In light of this law, Hawaii employers may want to review their hiring policies and practices for compliance with the law before the January 1, 2019, effective date. They may also want to train employees involved in the hiring process on the new law. As more and more states pass legislation, multistate employers may want to start using salary history inquiry limitations as a baseline in recruiting efforts.