In its latest effort to close the "gender gap" on wages, the New York City Council has enacted legislation (effective in 180 days) prohibiting employers from inquiring about a job applicant's "salary history." As the new law forbids inquiry into the "salary history" of any applicant (with very limited exceptions), it is not clear how limiting the questions an employer can ask will actually narrow the gender gap.
Without disputing or debating the gender gap in pay, our view is that the new law seems to be little more than window dressing and adds to the growing list of verboten topics that make it harder for New York City employers to hire the best person for the job. The new law raises many questions for which there remain no clear answers and leaves employers exposed to potential liability from yet another angle.
What employers cannot do:
- Employers are forbidden to "inquire about the salary history" of an applicant or to rely on such salary history in negotiating terms of employment;
- "Inquire" means to "communicate any question or statement" to the applicant or their current or former employer "for the purpose of obtaining an applicant's salary history" or to search public records to learn their salary;
- "Salary history" includes "current or prior wage(s), benefits or other compensation" but excludes "any objective measure of the applicant's productivity such as revenue, sales or other production reports."
- "Salary" is not defined, but "salary history" includes the applicant's "current or prior wage." While other laws distinguish between employees paid by salary or hourly wage rates, the law appears intended to apply to both means of payment and employers should not differentiate between the two.
What employers can do:
- Discuss expectations of salary, benefits or other compensation relating to the new position (i.e., what the new employer is prepared to offer). This includes compensation the applicant would lose if they left one job for the other;
- Verify the applicant's salary history "where an applicant voluntarily, and without prompting, discloses" their salary history;
- Conduct (lawful) background checks, but employers may not use any compensation information they obtain from them;
- The law does not apply to "applicants for internal transfer or promotion within their current employer."
What should employers do now?
- Ensure that applications do not require applicants to disclose information now prohibited by law;
- Counsel interviewers not to ask questions about an applicant's "salary history";
- Modify handbook policies and separation documents to remove an employer's agreement to disclose "salary history" when sought as part of a reference check;
- Modify handbook policies to prohibit employees from disclosing "salary history" about a current or former employee to an inquiring potential employer.
Questions left unanswered:
- Can a former employer be liable under this or any other law for disclosing salary history that results in the applicant not being hired for a new position, or being offered less than they otherwise might have received?
- What are "benefits" within the meaning of the law? Does this mean employers cannot ask about current medical contribution rates, retirement plans, paid time off or eligibility for bonuses? If so, how can an employer make a competitive offer, or entice an employee with better benefits?
- What is "other compensation?" Would this include things like a car allowance or employee discounts?
- What can or can't an employer ask or say before it is considered to be unlawfully "prompting" the applicant to divulge information?
- What is the standard for measuring when an applicant has made a "voluntary disclosure" permitting the employer to ask further questions about it?
- Where an employee voluntarily discloses information and the employer is, therefore, permitted to "consider the salary history," may the employer speak freely and ask questions? If so, are they limited to the specific areas the applicant disclosed?
- Can an employer ask whether the applicant was treated as "exempt" from the overtime requirements of federal and state laws, or is doing so "prompting" the disclosure of salary history?
- Can an employee waive rights under the law in order to permit a "former employer" to provide salary information as part of a reference check?
The new law amends the New York City Human Rights Law and applies to all private employers in New York City with four or more employees. Employers can be sued either in court or through the filing of a complaint with the NYC Commission on Human Rights. The City Human Rights Law imposes individual liability and can result in an award of punitive damages and civil penalties if violated. If nothing else, employers have yet another law to consider and comply with in order to reduce their legal exposure.