Employer Beware – New Requirements for New York City-based Businesses

Effective October 31, 2017, after being signed into law by New York City Mayor Bill de Blasio on May 4, 2017, The New York City Human Rights Law has been amended to prohibit employers from asking questions about job applicants’ history of wages, salary, benefits, and other compensation during all stages of the interview process. Additionally, an employer with existing knowledge of an applicant’s salary is now prohibited from relying on that information when making determinations related to compensation. The stated purpose of Local Law 67 is to reduce the likelihood that women will be prejudiced by their salaries at previous jobs, and “to help break the cycle of gender pay inequity.” This effort makes New York City the fourth city, state, or U.S. territory to ban employers from asking about salary history during the hiring process.

Failure to comply with this new law, Local Law 67 (codified as section 8-107(25) of the New York City Human Rights Law, N.Y.C. Admin. Code §§ 8-101 – 8-131), may subject employers to unlimited compensatory and punitive damages and an award of attorneys’ fees. In addition, civil penalties can be as high as $125,000 for “intentional violations” and up to $250,000 for “intentional malicious violations.” In certain instances, the New York City Commission on Human Rights may also seek punitive damages for willful violations.

Specifically, the new law makes it an “unlawful discriminatory practice” for an employer to: (i) inquire about the job applicant’s salary history; (ii) search publicly available records for an applicant’s salary; or (iii) rely on the salary history of an applicant when determining his or her prospective salary, benefits, or other compensation.

There are, however, four statutorily defined exceptions that provide safe harbor for the prospective employer: (i) the new law will not override any federal, state or local law specifically authorizing the disclosure or verification of salary history for employment purposes; (ii) employers may consider the salary history of applicants for internal transfers or promotion; (iii) employers may verify an applicant’s disclosure of non-salary related information or conduct a background check, provided they do not rely on any incidental salary disclosures; and (iv) the new law will not apply to persons applying for government jobs for which salary, benefits, or other compensation are determined by a collective bargaining process.

It is important to keep in mind that the new NYC law does not constitute a strict ban on all salary-related discussions during the job interview process. For instance, it does not prohibit inquiring about an applicant’s expectations concerning salary, benefits and other compensation (including unvested equity or deferred compensation that might be subject to forfeiture as the result of the applicant’s resignation from his or her current position). As importantly, the prospective employer is not restricted from considering an applicant’s salary history when and if the information is offered by the applicant “voluntarily and without prompting.”

A conservative approach is warranted until the contours of the new law are more clearly defined. Employers should consider adding salary history to the list of proscribed topics for interview purposes, which currently includes but is not limited to a candidate’s age, national origin, sexual orientation, genetic information, marital or familial status, and political or union affiliation. Also, questions about salary history should also be eliminated from employers’ application forms. A complete understanding of best practices may develop as these new proscriptions are fully vetted through the administrative process before the New York City Human Rights Commission, and/or in litigation in the New York courts. Until then, a degree of uncertainty exists with respect to the scope and effect of the new law.