For New York City employers, it is time to rework those standard interview questions. On April 5, 2017, the New York City Council overwhelmingly approved a bill amending the NYC Administrative Code to prohibit employers from inquiring about, or relying on, a prospective employee’s salary history.

Let’s take a closer look at what it means from hiring organizations.

Specifically, the bill makes it an “unlawful discriminatory practice” for employers to inquire — in writing or otherwise — about the salary history of a job applicant, or to rely upon a job applicant’s salary history unless the applicant voluntarily discloses the information to a prospective employer.

The salary history ban is being touted as a step towards eliminating gender pay inequality. It is intended to focus salary decisions in hiring upon an applicant’s skill and ability, and market compensation for the role without considering the applicant’s prior salary, which potentially was deflated due to discriminatory, gender-based considerations.

Supporters of the bill believe it will stop perpetuating the discriminatory gender-based salary gap for similarly-situated job applicants. Opponents contend employers should not face blanket prohibitions on salary history inquiries, and wage disparities generally, which may be based upon legitimate, non-gender based factors such as prior job performance.

Don’t rely upon salary history, unless . . .
The NYC ban, which will become effective 180 days following Mayor Bill de Blasio’s signing it into law, contains two main prohibitions:

First, it is an unlawful discriminatory practice for employers to inquire about a job applicant’s salary history (which includes not only a current or prior wage, but benefits and all other forms of compensation): (a) from an applicant; (b) from the applicant’s current or prior employer; (c) from a current employee, former employee or agent of the applicant’s current or prior employer; or (d) by searching publicly available records or reports for information on the job applicant’s salary history. However, an employer is permitted to discuss with an applicant her or his objective measures of productivity (e.g., sales or revenue generated), to discuss the applicant’s expectations as to salary, benefits and other compensation and to inform the applicant about proposed or anticipated salary or salary range.

Bloomberg/file photo

Second, it is an unlawful discriminatory practice for an employer to rely on a job applicant’s salary history in determining the applicant’s compensation at any stage of the employment process unless the applicant, unprompted, willingly disclosed her or his salary history.

The NYC bill contains limited exceptions in circumstances where applicable law authorizes the disclosure or verification of salary history for employment purposes, and also does not preclude employers from verifying an applicant’s non-salary information and conducting background checks so long as any accompanying disclosure of salary history is not relied upon for purposes of determining salary, benefits or other compensation during the hiring process. Additionally, the law is limited to job applicants, and does not facially apply to existing employees transferred or promoted to new internal positions.

NYC is a national trendsetter, again
New York City is among the first jurisdictions to enact legislation on salary history inquiries. Philadelphia and Massachusetts have introduced similar bans, and it is widely expected that a host of other cities and states will follow suit. Speaking of (law)suits, the Philadelphia law has recently been challenged by Philadelphia’s Chamber of Commerce, alleging a salary history ban violates businesses’ First Amendment (free speech) rights without demonstrating those employer inquiries actually perpetuate gender-based wage discrimination. Although none of the NYC, Philadelphia or Massachusetts measures have taken effect yet, and despite the possible legal challenges ahead (many of which undoubtedly will focus on the tug of war between combatting gender-based discrimination and preserving an employer’s free speech rights), businesses are forewarned to prepare for the ripple effect of this wave.

Like other prohibited employer inquiries that have garnered local and national attention — remember the “ban the box” movement to eliminate inquiries about an individual’s criminal history? —the salary history ban is gaining momentum. New York City employers should immediately review and revise their form applications, interview processes (including training of those conducting interviews) and reference and background/credit check procedures to ensure the questions and topics covered do not implicate disclosure of an applicant’s salary history. Non-NYC employers also should carefully follow this trend to make sure they are not caught flat-footed in the event a similar ban is imposed in their jurisdiction. Additionally, employers must coordinate with engaged outside recruiters and placement firms to make sure they do not receive unauthorized disclosure of prohibited applicant information.

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The salary history ban likely will pose a more significant issue for smaller companies without structured HR departments, as it provides a litigation threat to an unwary employer with less formality to its application, interview and overall hiring process. Additionally, such salary history inquiries may prove less important for larger companies that are more likely than smaller ones to access and analyze market compensation metrics for particular positions, and therefore less reliant on asking an applicant how much they make.

Finally, it is important to note that, although the NYC law does not make it an unlawful discriminatory practice for an employer to consider salary history if a job applicant, unprompted, voluntarily discloses the information, such “loophole” may prove to be a trap for the unwary in the form of claims that an applicant did not willingly disclose such information to a prospective employer. This possibility can result in significant consequences, as an individual either may file a civil lawsuit seeking back pay, compensatory damages and attorney’s fees, or turn to the New York City Commission on Human Rights. This is the agency with enforcement authority over the NYC Human Rights Law and it may impose a civil penalty of up to $125,000 for an unintentional violation, and up to $250,000 for willful acts.

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