To promote fair employment practices and close the pay gap for women and people of color, Mayor Bill de Blasio is expected to sign a bill passed by an overwhelming majority of the New York City Council on April 5, 2017 that will prohibit both private and public sector employers from inquiring about an applicant’s salary history. The new law, which will take effect 180 days after it is signed into law by the Mayor, applies to employers with four or more employees (including employers with fewer than four employees located in New York City). The legislation is expected to face legal challenges, including from trade associations such as the U.S. Chamber of Commerce.

While similar laws have been enacted in the state of Massachusetts and in the city of Philadelphia, the Massachusetts law does not take effect until July 1, 2018, and the Philadelphia law, which is due to take effect in May 2017, is now the subject of a legal challenge filed by the Chamber of Commerce for Greater Philadelphia. Comparable legislation has been introduced in more than a dozen other jurisdictions, including Maryland, New Jersey, Pittsburgh, and Washington, D.C.

Prohibited Actions and Penalties for Non-Compliance

The New York City law specifically prohibits employers from: 1) inquiring about an applicant’s salary history, which is defined to include prior or current wages, benefits, or other compensation; or 2) relying on an applicant’s salary history in determining the salary, benefits, or other compensation for that applicant, including as part of the negotiation of an employment contract. An unlawful “inquiry” is defined by the law to include any questions or statements, in writing or otherwise, regarding the applicant’s salary history directed to the applicant, the applicant’s current or prior employer, or a current or former employee or agent of the applicant’s current or prior employer. Additionally, the New York City law prohibits employers from searching publicly available records for salary history information and from using such information as a means to determine a candidate’s salary. This added prohibition will have the effect of making the New York City law the broadest one enacted thus far.

The law will be enforced by the New York City Commission on Human Rights, which can impose civil penalties of up to $125 for an intentional violation and up to $250,000 for an “intentional malicious violation.” Alternatively, an aggrieved individual may elect to pursue private litigation against an employer for alleged violation of the law, in which case the plaintiff may be entitled to recover compensatory damages (including back and front pay), punitive damages, and attorneys’ fees.

Exceptions

Notably, employers may consider – and seek to verify – salary information for the purpose of determining salary, compensation, and benefits where an applicant voluntarily, and without prompting, discloses his or her salary history. It may prove challenging, however, for employers to demonstrate that any such disclosure by an applicant was voluntary and unprompted.

Beyond this, there are four exceptions to the prohibition on salary history inquiries. First, employers will still be permitted to inquire about and/or consider the salary history of applicants for internal transfer or promotion. Second, the new law will not apply to public employees whose salaries are determined by collective bargaining agreements. Third, the new law does not prohibit non-salary related background checks, but, if the background check discloses an applicant’s salary history, such information cannot be relied upon during the hiring process for purposes of setting the candidate’s compensation. Fourth, employers are authorized to inquire about the job applicant’s expectations regarding salary, benefits, and other compensation, including with respect to unvested equity and deferred compensation that the applicant would forfeit by leaving his or her current employer.

Recommended Next Steps

Unless and until the new law is enjoined (which may never happen), employers in New York City should remove questions concerning salary history from their job applications, and train their recruiters and hiring managers to conduct job interviews in a manner that is compliant with the law. Employers should also ensure that third parties they engage to conduct background checks will not conduct “salary verification” for New York City job applicants. Employers remain free, of course, to inform job applicants about the anticipated salary for any given position.