New York City has now joined the city of Philadelphia, the state of Massachusetts, and the commonwealth of Puerto Rico in prohibiting private sector employers from inquiring into the salary history of job applicants. Mayor Bill de Blasio has signed a new law that prohibits employers from asking job applicants about their salary, benefits, or other compensation history during the hiring process. The law is effective as of October 31, 2017.
The new law amends the New York City Human Rights Law, which is already the broadest anti-discrimination statute in the country, and applies to private employers in New York City with four or more employees. Referred to by the Mayor's Office as "a milestone achievement in the fight for pay equity," the law is intended to help close the gender pay gap by eliminating employers' reliance on prior salary histories to set compensation levels. Specifically, the new law prevents an employer or its agent from:
- inquiring about the salary history (including wages, salary, benefits, and other compensation) of a job applicant; and,
- relying on the salary history of a job applicant when making hiring decisions or negotiating salary or benefits.
The law signed by Mayor de Blasio has changed since it was first introduced in the New York City Council. As a result of outside pressure, it carves out exceptions for internal transfers and promotions where federal, state, or local law specifically authorizes disclosure or verification of salary history and for public employees where the salary is determined by collective bargaining. Additionally, employers may consider and verify salary history if the applicant volunteers the information unprompted. Employers are cautioned that using salary history in that situation could create a trap that allows employers to be taken advantage of by unsuccessful applicants.
Philadelphia's similar law is currently facing a legal challenge from the Chamber of Commerce for Greater Philadelphia. A federal court has stayed the implementation of the law, which the Chamber of Commerce claims violates the First Amendment by suppressing the free speech rights of employers. It is anticipated that the New York City law will draw a similar challenge. The outcome of such challenges is uncertain.
The new law is likely to create substantial issues for employers, given the number of businesses that commonly seek salary histories from job applicants, including on many application forms. Particularly at risk are businesses without robust human resources departments that keep track of the hiring process and provide specific standards and guidelines.
Because this law amended the New York City Human Rights Law, the consequences for violations may well be onerous. As stated in the Mayor's press release: "Individuals can file a complaint with the NYC Commission on Human Rights, which has the ability to fine employers with civil penalties of up to $250,000 for willful and malicious violations of the law and can award compensatory damages to victims, including emotional distress damages and other benefits." As New York City employers know all too well, the law provides for recovery of compensatory and punitive damages with no damages caps and for attorneys' fees. It is reasonable to expect an avalanche of litigation, including potential class action lawsuits against employers that are frequently seeking new staffers but have failed to change their practices.
Now is the time for employers to act. We suggest that employers review their job application forms and interview checklists, as well as consult and train all employees involved in the hiring process to ensure that they are informed and trained on the new law. Revisions of employee handbooks and manuals may also be called for.
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