In order to understand the complexities of the issue of setting a new hire’s pay based on his or her prior pay, two legal issues should be considered. All court decisions interpreting the Equal Pay Act (EPA) and the Equal Employment Opportunity Commission (EEOC) agree that employers may ask about prior salary history, although a few states have statutes or local ordinances prohibiting the inquiry. The permissibility of a private-sector employer to use prior salary to set current pay is very much dependent on geographical location. The Ninth Circuit says no, but several federal Courts of Appeal and the Seventh Circuit have said yes. Companies should review their pay practices against the physical locations of their employees to determine which laws apply and decide whether the company will have a single pay policy nationwide with respect to prior pay or whether the company will follow the law in each jurisdiction where it has employees.
