Lt. Gov. Peggy Flanagan recalled feeling uncomfortable when she applied for a job years ago and the employer asked her last salary. She said she felt she had to answer – and found out after she was hired that she was then paid $40,000 less than her predecessor.
“This has consequences … that’s real wealth,” Flanagan said. “And when we talk about this for women and women of color in particular, it’s no wonder that we see gaps in homeownership, gaps in overall health and wellbeing. This is where it starts, in wealth creation and the ability of you to care for yourself, to care for your family and to set up your own future.”
She and other Minnesota leaders gathered at the State Capitol on Thursday to highlight a new law taking effect Jan. 1 that prohibits employers from asking job candidates about their salary history when hiring and negotiating pay. Candidates can still volunteer their earnings history on their own.
Advocates of the law, passed this summer by the Minnesota Legislature, say that women and people of color face discrimination in the workforce and on average are paid less than male and white employees. Learning a candidate’s last salary can be used to justify lower compensation, they say, arguing that cutting out the question will push employers to pay workers based on their skills.
“In 2024, we are going to put an end to this discrimination … We can and must live in a state where men and women, no matter their race and ethnicity, have the same opportunities to succeed and this is one way that we’re going to try to make that goal a local reality,” Flanagan said.
The legislation has drawn opposition from some business groups. John Reynolds, Minnesota state director for the National Federation of Independent Business, said the law is well-intentioned. But he said the penalty for violating the law is “extremely steep, and also it’s yet another mandate in a year full of them at both the state and federal level for small businesses.”
Job seekers have up to one year to file a complaint with the Minnesota Department of Human Rights if an employer asks about their current or past pay. Companies that violate the state’s Human Rights Act, which the law falls under, can be ordered by an administrative law judge to pay a civil penalty to the state and pay an aggrieved party compensatory damages, in addition to facing punitive damages in an amount not to exceed $25,000. Making one mistake, said Reynolds, could sink a lot of small businesses.
Reynolds said the voluntary disclosure creates a one-way street where the applicant can disclose their pay history if it’s to their advantage in negotiation, but the employer is prohibited – what amounts to “a heavy thumb on the scale.”
Eighteen other states have banned employers from asking people’s salary history, from North Carolina to Alabama to Massachusetts. A range of cities have also adopted the law, too — in Philadelphia, an appeals court recently reinstated the ban after the local Chamber of Commerce sued over claims that the mandate would violate free speech rights of businesses.
Boston University School of Law conducted a study finding states that enacted pay history question bans saw an 8 % increase in pay for women and a 13 % increase in pay for Black workers. The study found half of the wage gap for women looking for jobs disappeared under a salary history ban.
The Minnesota Department of Human Rights went to the Legislature with the bill, which was initially introduced two years ago. Commissioner Rebecca Lucero said she doesn’t believe that most employers and businesses actively want to pay women less than men, but pay discrimination is happening over and over again.
“There are a variety of factors that keep the gender and racial pay gap as the status quo and that’s why this law is so important,” she said. “Everywhere that we can be proactive to prevent discrimination from occurring in the first place is better for all of us.”
Minnesota women on average lose an estimated $447,960 in lifetime earnings due to the gender wage gap, with women of color and Native American women experiencing even greater losses, according to a recent report from the Women’s Foundation of Minnesota and the Center on Women, Gender, and Public Policy of the Humphrey School of Public Affairs at the University of Minnesota.
“In other states we’ve seen a very positive closing of the pay gap … and I think that’s a really sure sign of the structural change that can be made in order to get rid of systems that uphold inequities based on people’s gender and race,” said state Rep. Kaohly Vang Her (DFL-St Paul).
Linda Sloan, executive director of the Council for Minnesotans of African Heritage, said the legislation “could change lives.” Black women make much less than white men on average, and “that is significant when you look at it over the course of time,” she said. “If raises are based on where you start then that means people who are … getting paid a lot less are going to be just inching ahead, basically, as opposed to moving forward.”