On October 31, 2017, the New York City law banning public and private employers and employment agencies in New York City from asking job applicants about, or otherwise relying on, their salary history and employee benefits in the interview process takes effect. The legislation formally amends Section 8-107 of the New York City Human Rights Law, which applies to New York City-based employers of four or more persons.

Overview:

The new measure builds upon the bans recently put into place by New York State and New York City regarding inquiries into salary history for public sector jobs. It reflects a desire to address wage disparities between men and women, and stem any residual discrimination that applicants may have faced in the past by providing previously underpaid applicants the ability to negotiate compensation packages with a blank slate.

Under the new law, “salary history” is broadly defined to include “current or prior wage, benefits or other compensation” but excludes “any objective measure of the applicant’s productivity such as revenue, sales, or other production reports.” N.Y. ADMIN CODE § 8-107(25)(a) (2017). Once effective, it will be a discriminatory employment practice for an employer to (i) ask an applicant directly about his or her salary history or search publicly available records for such information, or (ii) rely on an applicant’s salary history in determining the applicant’s salary, unless the applicant “voluntarily and without prompting” discloses his or her salary history, in which case an employer is allowed to use such information and verify the details. Id. §§ 8-107(25)(b), (d). An employer can, however, tell an applicant the expected salary or salary range for a particular position, and may discuss with an applicant any expectations he or she may have regarding compensation and benefits, including “unvested equity or deferred compensation that an applicant would forfeit or have cancelled by virtue of the applicant’s resignation from their current employer.” Id. § 8-107(25)(c). An employer may not rely on information relating to salary history that is disclosed during a background check. Id. § 8-107(25)(a).

By its terms, the measure does not apply to internal job applicants applying for a transfer or a promotion, public employees whose salaries are determined by collective bargaining agreements, or where disclosure or verification of salary history is required or authorized by law. Id. § 8-107(25)(e). The New York City Commission on Human Rights will enforce the ban and investigate alleged violations, and has the authority to impose civil penalties of up to $250,000 for willful misconduct. Employers may also be liable for compensatory damages (front and back pay), punitive damages and attorneys’ fees and costs.

Four Takeaways for Employers:

New York City-based employers should review their hiring practices and determine, what, if any, changes are necessary to comply with the new law.

1. Review hiring practices and documentation: Any requests for salary history should be removed from job applications and online portals. A review of employment agreements may be appropriate as well.
2. Train recruiting personnel about the new salary inquiry law: Employees who are active in the recruitment of new employees should be informed of the ban and provided training for conducting interviews, including how to handle any voluntary disclosures of salary history. Similarly, employers should adopt internal procedures for how to handle disclosures of salary history during background checks. If an applicant voluntarily discloses his/her salary, establish a procedure to document that disclosure, such as a form the applicant signs confirming that he/she voluntarily disclosed his/her salary to the prospective employer.
3. Focus on expectations: Ask applicants what their expectations are regarding compensation.
4. Application of the law may extend to asking current employees about their salaries with previous employers: Although the new salary inquiry ban explicitly applies to “applicants,” it may be interpreted to apply to an employer asking its current employees about their salaries at previous employers. The New York City Commission on Human Rights’ guidance regarding the Fair Chance Act (prohibiting inquiries about applicants’ criminal histories without first extending a conditional offer of employment) defines “applicant” to include current employees. See NYC Commission on Human Rights Legal Enforcement Guidance on the Fair Chance Act, Local Law No. 63 (2015), available at https://www1.nyc.gov/assets/cchr/downloads/pdf/FCA-InterpretiveGuide-112015.pdf. Given that the Commission will also administer the salary inquiry law, it may interpret “applicant” to cover current employees.

If you have any questions about this alert, please contact Anne C. Patin (212-574-1516) at Seward & Kissel.