On Wednesday, March 13, 2013, the New York City Council passed a bill (Int. No. 814) amending the New York City Human Rights Law to prohibit discrimination based on an individual’s unemployment, overriding Mayor Bloomberg’s veto. “Unemployed” or “unemployment” means not having a job, and being available for work, and seeking employment. The law will go into effect on June 11, 2013.

The law prohibits an employer (who have at least 4 employees) or employment agency from basing an employment decision regarding hiring, compensation or the terms, conditions or privileges of employment on an applicant’s unemployment. Independent contractors (who are not themselves employers) are counted as employees. Additionally, the law prohibits an employer or employment agency 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.

Employers are permitted to determine that only applicants who are currently employed by the employer will be considered for employment or be given priority for employment. Also, employers are not prevented from setting compensation or terms or conditions of employment based on that person’s actual amount of experience. The new law does not apply to the exercise of any right of an employer or employee pursuant to a collective bargaining agreement.

The law 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 (who will be motivated) 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 results 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 fails to prove that such alternative policy or practice would not serve the employer as well. Expensive to defend? Sounds like it.

As New York currently has a 9.1% unemployment rate, it is clear that many job applicants are currently unemployed. An individual who believes he or she has been discriminated against can file a private action for damages, injunctive relief, punitive damages and reasonable attorney’s fees and costs, or go directly to the City Commission. Not only can the Commission order an employer to hire the prospective employee, but failure to comply with a Commission order may result in civil penalties (if the Commission establishes a discriminatory practice, it can impose a civil penalty up to $250,000!)

What can possibly go wrong? Employers are right to fear that the new law will result in a flood of litigation by unemployed job applicants who are angry after being rejected for open positions. We all know even potentially baseless lawsuits are expensive to defend.