Paycheck Fairness Act Bans Salary History Questions, Boosts Damages in Wage Discrimination Cases

This bill, officially titled the Paycheck Fairness Act, takes aim at the persistent gender pay gap by significantly strengthening the rules around equal pay. It makes two major moves: first, it makes it much harder for employers to legally justify pay differences between men and women, and second, it bans employers from using an applicant's past salary history to set their new wage, effectively stopping the cycle of low pay following people from job to job. The law also increases the penalties employers face if they are caught violating equal pay rules, adding compensatory and punitive damages to the mix.

The End of the Salary History Question

If you’ve ever been asked about your previous salary during a job interview, you know how awkward—and potentially limiting—that question can be. Section 10 of this Act bans employers from asking about or using a prospective employee's wage history to screen or set their new pay. Why does this matter? Because if you were underpaid in your last job, using that number as a starting point for your new salary just locks in that historical discrimination. Under this new rule, employers can’t even ask your former employer what you made. They have to base your job offer on the value of the position itself, not your past earnings. The only exception is if you volunteer your history after receiving a job offer to try and negotiate a higher salary. Violating this rule comes with fines up to $10,000 and the risk of being sued for up to $10,000 in damages by the affected applicant.

A Much Higher Bar for Employers

The current Equal Pay Act allows employers to defend pay differences if they can show the difference is based on a “bona fide factor other than sex”—things like education or experience. Section 3 of this Act raises that bar dramatically. Now, the employer must prove four things: that the factor is job-related, necessary for business, is not based on a sex-based pay differential, and—here’s the kicker—that the factor explains the entire difference in pay. If an employer pays a man $1 more than a woman for the same work, that entire $1 difference must be justified by the factor. This is a tough standard, and it means employers will need to be meticulous about how they set compensation, or they risk facing much costlier litigation.

Data Transparency and New Enforcement Tools

For larger companies, transparency is about to increase. Section 8 mandates that the Equal Employment Opportunity Commission (EEOC) must start collecting detailed pay and job data from all private employers with 100 or more employees. These companies will have to report the number of employees within specific pay bands, broken down by sex, race, ethnic identity, and job category. This new data collection is designed to help the EEOC better spot systemic pay discrimination and focus their limited resources. While this is a huge win for transparency, it’s a significant new administrative burden for covered employers, who will need to dedicate time and money to compiling this complex data annually.

Protecting the Paycheck Conversation

Ever been told not to discuss your salary with coworkers? Under this bill, that’s explicitly illegal. Section 3 expands anti-retaliation protections. An employer cannot punish you for asking about, discussing, or disclosing your own wages or the wages of your coworkers. This protection is crucial because finding out about pay disparities is often the first step toward fixing them. If you work in HR and your job requires you to access this data, you still have to keep it confidential, but for everyone else, the conversation is now protected.

Investing in Negotiation Skills

Recognizing that enforcement is only part of the solution, Section 5 creates a new grant program run by the Department of Labor to fund negotiation skills training, specifically aimed at women and girls. This training is intended to be integrated into existing education and workforce programs, from high school to job training centers. The goal is to empower individuals to negotiate fairly from the start, addressing the problem both through legal enforcement and personal skill-building. The Secretary of Labor must report to Congress annually on how effective these training programs are at actually closing pay gaps.