A Look at New York City’s New Law Prohibiting Employers From Inquiring About the Salary History of Applicants

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?

Closing Thoughts (and Who’s Affected)

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. As its title suggests, the NYC Human Rights Law applies to and protects employees who work within the five boroughs. For out-of-state employers, only those employees within New York City are covered by the law. The Courts have made clear that the impact of the employment action must be felt by the plaintiff in New York City, irrespective of where the employer is located. Likewise, the law will not apply to employees of a NYC employer if those employees work outside the city’s borders.

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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.

 

  • http://www.NeoRecruiter.com Eric Putkonen

    How could it narrow the gender wage gap…well if she is already
    underpaid, how is she supposed to catch up if we keep basing offers on
    her current salary? Over my career as a recruiter, I have seen lower offers many times because a person’s current salary is lower. I think the law might close the gender wage gap a bit.

    • Laurent Drogin

      Eric, in theory you are correct. But consider that there are already federal and state laws in place that prohibit employers from paying women less than men for comparable work. Those laws seem like the most direct avenues to solve the problem, which no one is denying exists.
      Knowing anyone’s “salary history” can result in a lower offer regardless of the gender of the applicant. If a male employee is earning $40,000 the employer can offer $42,000 even though others are earning $50,000 for the same position. Substitute “female” for “male” in my prior sentence. It’s the same outcome irrespective of gender. Knowing or not knowing salary history does not solve the problem.

      • http://www.NeoRecruiter.com Eric Putkonen

        Not knowing “salary history” favors the underpaid so they can catch up. If women tend to be underpaid (as you don’t deny the problem exists), then this law makes it easier to overcome being underpaid. Yes, there are underpaid men too. But if the gap exists, then there are more underpaid women than men.

        • Laurent Drogin

          But the ultimate questions are why the gap exists and whether this law really does anything to close it. If experience and track record are relevant differentiators, then women who have less because they have been out of the workforce can still lawfully be paid less than men with more experience. I don’t think we are disagreeing about anything other than whether this law will accomplish what it sets out to do. Time will tell. But until then, employers face another law with which they must comply under threat of litigation.

  • Travis L

    Is this related to New York City only or the whole state of NY?

    • Laurent Drogin

      New York City only… For now.

  • http://www.heritage.org/ TVEXECUTIVE

    This is a new low for NYC. This is a real job killer. NYC had become so unfriendly to business. Get out while you still can.

    • Laurent Drogin

      From my perspective, representing employers, there are two major problems. First, the City Council passes laws that are rubber-stamped by City Hall. The laws have not been thought through as to how they are going to play out and work in the real world. The law of unintended consequences takes over, as real world issues and questions arise for which there are no solid answers. Second, the vagaries in the law wind up as expensive “gotchas” for employers. They are subjected to large fines, penalties and damages for innocent mistakes or imperfect compliance efforts. It becomes a money grab by either the City or plaintiffs’ attorneys who exploit the gaps and weaknesses that the laws create. These laws can be thought of as hurdles. You can clear each one, but eventually there are so many that you get tired and one trips you up.

      • http://www.heritage.org/ TVEXECUTIVE

        This law WAS well thought out Its intent to kill jobs is a great success.