Following a growing nationwide trend, the New York City Council passed a bill (“the Law”) on April 5, 2017, which would prevent employers from making inquiries to an applicant, or an applicant’s current or former employer, regarding the applicant’s salary history or to take an applicant’s salary history into consideration when making initial compensation decisions. The Law is currently sitting on Mayor Bill de Blasio’s desk and will become effective 180 days after it is signed – which Mayor de Blasio is expected to do shortly.
The Law, which applies to employers in New York City with four or more employees, amends the New York City Human Rights Law and makes it an “unlawful discriminatory practice” for employers or their agents “to inquire about the salary history of an applicant,” or to “rely on the salary history of an applicant in determining the salary, benefits or other compensation for such applicant during the hiring process [or] negotiation of a contract.” “Salary history” encompasses all forms of employee compensation, including past or current wages, benefits or other compensation.
The Law also broadly defines what constitutes an “inquiry.” Specifically, the Law states “to inquire means to communicate any question or statement to an applicant, an applicant’s current or prior employer, in writing or otherwise, for purposes of obtaining an applicant’s salary, or to conduct a search of publicly available records or reports for the purpose of obtaining an applicant’s salary history.” Given this broad definition, employers are likely prohibited from performing a Google search, for example, for the purpose of attempting to ascertain an applicant’s salary history.
The “inquiry” definition has some practical implications for employers who routinely perform background checks on new hires. Although the Law does not prohibit any “attempt by an employer . . . to verify an applicant’s disclosure of non-salary related information or conduct a background check,” there is a risk that employers may unintentionally come across an applicant’s “salary history” in the course of a background check. Crucially, the Law provides that if an employer unintentionally discovers salary history in connection with a background check, the Law is not violated unless the salary history is later used “for purposes of determining the salary, benefits or other compensation . . . including the negotiation of a contract.”
Not surprisingly, the Law includes a number of exceptions. For example, employers do not violate the Law when an applicant “voluntarily and without prompting” discloses her salary history. If an applicant makes such a voluntary disclosure, the employer may then consider salary history in determining the applicant’s proposed salary and may verify the salary history. The Law also explicitly distinguishes discussions regarding an applicant’s “expectations” with respect to compensation from “inquiries” into an applicant’s salary history. Under this latter exception, an employer presumptively does not violate the Law if it were to ask an applicant the salary she expected to be paid in the new position.
Notably, the Law does not apply to current employees applying internally with their current employer for new positions or promotions. Applicants for public employee positions, where salary is governed pursuant to collective bargaining, are also exempted. Lastly, employers do not violate the Law if any federal, state or local law either authorizes the disclosure of salary history or specifically requires knowledge of the salary history when setting an applicant’s compensation.
In sum, under the Law, employers will be prohibited from asking applicants about their prior salary history or generally utilizing prior salary history when setting compensation for new employees. In the likely event that Mayor de Blasio signs the Law, employers operating in New York City should review their employment applications and policies to ensure compliance with the Law and train all employees who conduct job interviews in order to avoid any prohibited inquiries. Further, New York City employers who routinely conduct background checks on job candidates must ensure that any unintentionally acquired information regarding an applicant’s “salary history” is not relied upon in determining future compensation.
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.