3 minute read | October.23.2017
There is a trend of regulations being put into place prohibiting prospective employers from asking questions about an applicant's recent or current compensation. "What's your salary?" has become a no-no in job interviews in several states (including Philadelphia, Massachusetts, Delaware and Oregon). New York City passed legislation in April 2017. California's Governor just signed a new law making prior salaries a thing of the past. San Francisco has become the latest city to prohibit employers from asking job applicants to disclose their salary history effective July 1, 2018.
These new rules create challenges for HR professionals and recruiters conducting interviews and negotiating offers with candidates. Job applications need to be adapted and salary discussion should be rather focusing on salary expectations than current or prior compensation.
What about Germany? Can you ask prior salary when hiring?
The concern with salary history is based on the notion that reliance on prior salary information contributes to continuing gender inequality. As a consequence, several US legislators have decided it's in everyone's best interest to ban the salary history question.
In Germany, the gender pay gap is suspected to range somewhere between 7 and 22 %, so one could very well argue that it should not be allowed to ask prior salary, even though the gap in Germany is attributed to a number of factors, including the occupations that men and women more commonly hold. Anyway, the new Pay Transparency Act does not specifically address the right to ask for prior pay during the recruiting process.
According to case law, in general, a prospective employer may only ask the candidate questions that are reasonable, legitimate, and do not disproportionately invade the candidate's privacy. The individual's right to privacy as guaranteed by the German constitution is seen as an important restriction. Only questions that are in the employer's rightful interest and needing to be answered because of the employment relationship to be established may be asked. The employer's interest must actually be so strong that the employee's personal rights are considered less important.
As a rule, questions relating to the vacancy are reasonable and legitimate. This is in line with German data privacy rules permitting to only acquire and store personal data if the data is necessary for the execution or termination of the employment. For example, the employer is allowed to ask for the applicant's educational background, professional qualifications and career.
As current and prior compensation are not directly linked to the vacancy and subject to the candidate's right to privacy, a prospective employer may generally not ask for it. As a rule, German courts do not recognize a future employer's interest to inquire a candidate's compensation as a basis for salary negotiations. Courts refer to other relevant factors the employer may ask such as previous professional experience.
Only where relevant for the vacancy, applicants may be asked about their current or previous compensation. This may be the case where salary is primarily performance-related which indicates the employee's commitment and dedication – and therefore his suitability for the job. If no exception applies, the candidate may not be asked the current or past compensation. If nevertheless asked such question during the hiring process, the candidate is allowed to lie to the employer about the previous compensation without having to fear any legal consequences after the recruitment.
Even if the employer reveals the lie, the employer cannot bring a claim against the employee or even reduce the employee's salary unilaterally. According to the Federal Labor Court only a false answer to a rightfully asked question can be a lawful reason for dismissal or a fraudulent misrepresentation with the legal consequence that the employer may contest the contract of employment.
German case law does not prohibit an applicant from voluntarily disclosing salary information. So if an applicant voluntarily and, without prompting, discloses salary history information, German law does not prohibit the employer from considering that information.