A new protection against pay discrimination has recently been signed into law in Rhode Island. The new law will go into effect January 1, 2023, and adds two significant provisions that are meant to protect both employers and employees in the fight to combat wage discrimination “by strengthening and closing gaps in existing wage discrimination laws.”
The first of these provisions is related to ‘Wage history and wage range’ and includes a salary history ban that prevents employers from seeking information about a prospective employee’s wage history in previous employment. Significant research has demonstrated that seeking salary history results in lower wages for women and people of color, primarily because this information “gives employers a bargaining advantage[…] In this way, pay inequalities are perpetuated.” Rhode Island now becomes the 21st state to issue a state-wide ban related to salary history. Exactly how, and to whom, these bans are applied varies by state.
Another important aspect of this provision is that is it encourages ‘Pay Transparency’ by requiring employers to provide applicants with the wage range for the position prior to discussing compensation. This is another step towards reducing the information gap between employers and employees in salary negotiations that has traditionally resulted in giving employers the edge in negotiations. Research has shown that salary range transparency can help to reduce wage gaps, much in the same way as discussed above. When applicants and employees have more information about prospective pay opportunities, it reduces the obstacles that previously existed in ascertaining one’s own market value.
This new law also establishes a ‘Safe Harbor’ for employers self-evaluating their own pay data for disparities. If action is brought against an employer that alleges a violation of the wage differential provisions, that employer will have an affirmative defense to such an allegation if they can provide proof of a good-faith effort (conducted within the previous two years) to analyze and eliminate unlawful wage gaps. This is a crucial step, as many employers face the dilemma of wanting to address pay inequality at their organization, but also know that any findings of disparity can be brought against them should they make their way into the wrong hands. This provision allows employers to safely look for these changes and operate under a two-year umbrella of safety in seeking to rectify any disparities. This provision follows similar statutes recently established in Massachusetts and Oregon that provide a legal defense for employers conducting self-audits.
This law represents another link in the chain of sweeping changes to state laws regarding pay equality and pay discrimination. Almost all of the ‘salary history bans’ signed into state laws have been enacted in the past 5 years, and we have already seen this type of provision used as the primary argument in two large class-action cases in California. Employers looking to ensure that their pay structures don’t hinge on the basis of race or sex should consider a robust pay equity analysis that separates pay-related variables (e.g. experience, education, performance, etc.) from demographic variables to determine if there is a statistically significant difference between different groups. This type of proactive approach to compensation can be a major step in creating more transparency, inclusion, and fairness within an organization.