Employers beware: New Jersey’s salary history ban, signed this past summer, takes effect on January 1, 2020.  On that date, New Jersey will join several other states (including New York and California) by prohibiting private employers from inquiring about an applicant’s compensation history, including salary, wages, commissions, benefits and other compensation.

The law provides for a private right of action as well as civil penalties.  Employers who violate the law can be fined up to $1,000 for a first offense, $5,000 for a second offense, and $10,000 for each subsequent violation and face additional risk under the New Jersey Law Against Discrimination.

Although the prohibition is broad, employers are permitted to consider and/or request salary history in certain limited circumstances:

  • If the applicant, without employer prompting or coercion, voluntarily reveals their salary history;
  • If the applicant is applying for an internal transfer or promotion;
  • If the employer knows an applicant’s compensation history through the applicant’s prior employment with the employer;
  • Pursuant to any federal law or regulation requiring the disclosure or verification of salary history for employment purposes, or requiring knowledge of salary history to determine an employee’s compensation;
  • If the applicant gives written consent to a headhunting agency to share salary history with prospective employers.

In addition, the law does not prohibit employers from:

  • Asking about an applicant’s previous experience with incentive and commission plans and the terms and conditions of those plans, provided (i) the employer does not seek or require the applicant to report information about the amount of earnings in connection with the plans and (ii) the employment opening includes an incentive or commission component as part of the total compensation package;
  • Asking applicants about their salary expectations;
  • Attempting to verify disclosure of non-salary related information when conducting a background check provided that the employer specifies that salary history information should not be disclosed (and if that information is disclosed, the employer may not consider it);
  • Requesting written confirmation of an applicant’s salary history after making an offer to the applicant that includes an overall compensation package. The employer cannot then alter the compensation package once it learns of the applicant’s salary history.

To prepare for Jan. 1, New Jersey employers should train all individuals involved in the hiring process on the new salary history prohibitions.  Employers should also review their employment applications to ensure there are no questions about compensation history, or that common applications for multi-locational employers clearly instruct New Jersey applicants not to answer questions about salary history.