On March 13, 2013, the New York City Council passed a bill amending the New York City Human Rights Law to prohibit discrimination based on an individual's unemployment, overriding Mayor Bloomberg's veto. The law is the latest expansion of the New York City Human Rights Law, which already contains more protected classes than the corresponding federal and New York state laws, and is effective on June 11, 2013.

The law defines "unemployment" as not having a job, being available for work and seeking employment. The law prohibits New York City employers (who have at least four employees) and employment agencies from basing an employment decision regarding hiring; compensation; or the terms, conditions or privileges of employment on an applicant's unemployment. Additionally, the law prohibits employers and employment agencies from advertising a job vacancy in New York City that requires applicants to be currently employed.

The law does not prohibit a New York City employer from considering an applicant's unemployment where there is a substantially job-related reason for doing so or inquiring into the circumstances surrounding an applicant's separation from prior employment. Additionally, the law does not prohibit an employer from considering "substantially job-related qualifications" defined as: a current and valid professional or occupational license; a certificate, registration, permit or other credential; a minimum level of education or training; or a minimum level of professional, occupational or field experience.

Unlike unemployment discrimination bills that have passed in New Jersey, Oregon and the District of Columbia, New York City's law allows job applicants to bring a private action alleging unemployment discrimination. (New Jersey's and Oregon's laws prohibit unemployment discrimination only in job advertisements.) An individual who believes he or she has been discriminated against can file a private action for damages, injunctive relief, punitive damages and reasonable attorneys' fees and costs, or go directly to the City Commission. Additionally, the City Commission can order an employer to hire the prospective employee and can impose penalties.

The law additionally discusses disparate impact. Disparate impact is a theory of liability that prohibits an employer from using a facially neutral employment policy or practice—it is not discriminatory on its face—if it has an adverse impact on members of a protected class. If class plaintiffs who sue under a disparate impact theory can prove the employment policy or practice had the effect of excluding the protected group, the employer must justify the continued use of the policy or practice as a "business necessity."

In New York City, a putative class of unemployed applicants can sue under a disparate impact theory and allege a policy or practice or a group of policies or practices results in a disparate impact to the unemployed. The employer then must plead and prove as an affirmative defense that such policy or practice has as its basis a substantially job-related qualification (defined above) or does not contribute to the disparate impact.

However, if the putative class demonstrates that a group of policies or practices results in a disparate impact, they are not required to demonstrate which specific policies or practices within the group result in such disparate impact. It will be up to the employer to prove that each of the named policies or practices has, as its basis, a substantially job-related qualification or does not contribute to the disparate impact. Moreover, the policy or practice resulting in disparate impact "shall be unlawful" if the putative class demonstrates using "substantial evidence" that an alternative policy or practice with less disparate impact is available to the employer and the employer does not prove that such alternative policy or practice would not serve the employer as well.

Under a disparate impact theory, an employer that often rejects unemployed applicants because they do not meet the job qualifications can be sued in a class action even if the employees' unemployed status had nothing to do with the decision not to hire them. As stated above, the employer would then have the burden of proving that the rejection of unemployed applicants was based on a substantially job-related qualification.

What This Means for New York Employers

With New York City's 9.1-percent unemployment rate, employers should have reason to be concerned that the new law will result in a flood of litigation by unemployed job applicants who are displeased after being rejected for open positions. Even baseless lawsuits can be expensive to defend. To potentially avoid liability, employers should revise any job posting that requires applicants to be employed and should ensure they do not base any employment decision going forward on an individual's unemployment status.