- What is “compensation history”?
- How do employers seek and use compensation history information?
- What is the impact of the use of compensation history?
- How do OFCCP’s laws protect workers from discrimination related to compensation history inquiries?
- Can an employer rely on an applicant’s compensation history when making hiring or pay decisions?
- Can an employer rely on compensation history volunteered by an applicant?
- How can employers proactively promote pay equity for workers?
- How does OFCCP investigate whether an employer’s reliance on compensation history results in or contributes to unlawful discrimination?
- Can employers fire, demote, or treat workers less favorably because they submitted a pre-complaint inquiry or filed a complaint?
- Whom can workers contact if they need assistance with filing a pre-complaint inquiry or complaint?
1. What is “compensation history”?
Compensation history refers to the compensation an applicant is currently receiving or the compensation the applicant has been paid in a previous job, including wages, salary, bonuses, and other benefits. The applicant may be a prospective employee or current employee applying for a position.
2. How do employers seek and use compensation history information?
Some employers ask about applicants’ compensation history on job applications, during interviews, or while negotiating offers of employment. They then might use that information as one of several factors when making decisions about hiring, promotions, or pay setting. For example, some employers base starting pay on an applicant’s prior salary. Some employers also screen out applicants for failing to provide their prior salary on an application, or for providing a salary that the employer has determined is either too low or too high to merit consideration of the applicant.
3. What is the impact of the use of compensation history?
Inquiring into and relying on an applicant’s compensation history for making hiring and compensation decisions can perpetuate and compound existing pay disparities for workers who have experienced inequality in the past, such as women, workers of color, workers who entered the labor market during a recession, and workers who temporarily left the workforce due to caregiving responsibilities. This practice also creates inefficiencies for employers and the economy as a whole, as pay disparities decrease job satisfaction, performance, retention and productivity. See U.S. Department of Labor, Women’s Bureau, Equal Pay in the United States: Salary History Bans (Mar. 2023).
4. How do OFCCP’s laws protect workers from discrimination related to compensation history inquiries?
OFCCP enforces Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era Veterans' Readjustment Assistance Act of 1974. Together, these laws prohibit employers who do business with the federal government (federal contractors and subcontractors) from discriminating against employees and applicants in compensation because of their race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or status as a protected veteran.
In addition, OFCCP’s pay transparency regulations prohibit these employers from discharging or otherwise discriminating against applicants or employees who inquire about, discuss, or disclose their compensation or that of others, subject to certain limitations.
As discussed in the FAQ below, OFCCP can investigate whether an employer’s reliance on prior salary (or other forms of compensation) is resulting in or contributing to unlawful discrimination under these laws. This might happen if, for example, an employer’s use of prior salary to set pay creates gender- or race-based pay gaps in its workforce.
5. Can an employer rely on an applicant’s compensation history when making hiring or pay decisions?
It depends. A growing number of state and local governments have passed laws that prohibit employers from asking about and/or relying on a job applicant's prior compensation when making hiring and pay decisions. The U.S. Office of Personnel Management (OPM) also recently issued a final rule that prohibits the use of compensation history in setting pay for federal employees.
Currently, a private employer’s reliance on compensation history to set pay may not itself be prohibited under federal law, but the practice may contribute to unlawful discrimination, depending on the specific facts and circumstances at issue.
Some courts have held that, under the Equal Pay Act (EPA), employers may not use reliance on candidates’ prior pay to justify gender-based pay differentials – either alone or, in some cases, along with other factors. See U.S. Department of Labor, Women’s Bureau, Equal Pay in the United States: Salary History Bans (Mar. 2023). The U.S. Equal Employment Opportunity Commission enforces the EPA.
While OFCCP does not enforce the EPA, OFCCP enforces compensation discrimination under Executive Order 11246 consistently with the principles of Title VII of the Civil Rights Act (Title VII). Gender-based pay discrimination claims under Title VII are subject to the affirmative defenses used to justify gender pay differentials under the EPA, including the employer’s defense that the pay disparity is due to any other factor other than sex. As a result, for Executive Order 11246 compensation discrimination claims, employers may similarly be precluded from justifying gender-based pay disparities by claiming they relied upon candidates’ prior or existing pay.
In March 2022, President Biden signed Executive Order 14069 directing the Federal Acquisition Regulatory (FAR) Council, in consultation with the Department of Labor, to consider issuing proposed rules to enhance pay equity and transparency, including rules limiting or prohibiting compensation history inquiries by federal contractors and subcontractors. The FAR Council has proposed a rule on this issue, which may lead to regulations that limit or prohibit these employers from seeking and considering information about job applicants’ compensation history when making employment decisions for personnel working on or in connection with a government contract and would require these employers to disclose compensation information in job postings.
6. Can an employer rely on compensation history volunteered by an applicant?
Relying on an applicant’s compensation history, even if affirmatively offered by an applicant, for making hiring and compensation decisions can have the same impact as when the information is solicited; in other words, it can reinforce, perpetuate, or compound past pay disparities and contribute to unlawful discrimination in the workplace. To mitigate that issue, reliance on compensation history, even if volunteered, is also prohibited under some state laws, OPM’s rule, as well as in the FAR Council’s proposed rule.
7. How can employers proactively promote pay equity for workers?
As described in OFCCP’s Fact Sheet from March 2023, Taking a Proactive Approach to Achieving Pay Equity, there are many steps employers can take to promote pay equity for workers, including applicants. Best practices include prohibiting reliance on compensation history and providing greater transparency in compensation and advancement discussions, among others.
8. How does OFCCP investigate whether an employer’s reliance on compensation history results in or contributes to unlawful discrimination?
Workers may file a pre-complaint inquiry or complaint with OFCCP if they believe their employer’s use of compensation history to make employment decisions results in or contributes to unlawful discrimination. OFCCP also accepts inquiries and complaints filed by third parties and representatives. OFCCP will review the allegations to determine if it is the right agency to investigate the matter.
In addition to complaints, OFCCP also conducts compliance evaluations, where it reviews whether an employer’s hiring and compensation policies (such as its reliance on prior salary) are discriminatory.
9. Can employers fire, demote, or treat workers less favorably because they submitted a pre-complaint inquiry or filed a complaint?
No, all those actions may constitute retaliation. It is illegal for an employer to retaliate against workers for submitting a pre-complaint inquiry, filing a complaint, or participating in an investigation. OFCCP’s regulations protect workers from harassment, intimidation, threats, coercion, or retaliation for asserting their rights.
10. Whom can workers contact if they need assistance with filing a pre-complaint inquiry or complaint?
If workers need assistance with filing a pre-complaint inquiry or complaint, they may contact OFCCP’s Help Desk at 1-800-397-6251. Workers who are deaf, hard of hearing, or have a speech disability should dial 7-1-1 to access telecommunications relay services.
The contents of this document do not have the force and effect of law and are not meant to bind the public in any way. This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies.
Last updated on January 29, 2024