The New York City Council passed a law on April 5 prohibiting employers from inquiring about or relying on a job applicant’s current or prior wage, benefits or other compensation. The council’s action reflects an emerging trend in cities and states across the country to prohibit questioning applicants about salary history, in an effort to close or eliminate the gender pay gap.
The Legislation
The law will take effect 180 days after Mayor Bill de Blasio signs it, presumably before the end of April, and it will amend the NYC Human Rights Law to make it “an unlawful discriminatory practice” for an employer or employment agency “to inquire about the salary history of an applicant for employment” or “rely on the salary history of an applicant in determining the salary, benefits or other compensation for such applicant” during the hiring and contract negotiation process. The term “inquire” includes directly asking the applicant, searching public records for the applicant’s salary history, and requests to other employers about the applicant. The term “salary history” is defined broadly to encompass “the applicant’s current or prior wage, benefits or other compensation.” It does not prohibit employers from inquiring about objective measures of productivity, such as revenue or sales. The law also permits discussion of “unvested equity or deferred compensation” that an applicant would lose as a result of resigning from their current employer.
An employer may consider and verify compensation information if the applicant “voluntarily and without prompting discloses” such information. Also, the law does not apply to internal applicants for transfer or promotion. Employers also may discuss with applicants their compensation “expectations,” and the law recognizes an exception for any federal, state or local law that “specifically authorizes the disclosure or verification of salary history for employment purposes” or “specifically requires knowledge of salary history to determine an employee’s compensation.” These exceptions should help employers subject to regulations that require them to factor in salary history in setting employee compensation.
The NYC Commission on Human Rights will enforce the new law, and will impose a civil penalty of up to $125 for an unintentional violation, and up to $250,000 for an “intentional malicious violation.”
The Emerging Trend
The New York City ordinance is part of a growing trend toward prohibiting employer inquiries about salary history. On Aug. 1, 2016, Massachusetts became the first state to prohibit employers from asking for an applicant’s salary history prior to making a job offer. The Massachusetts law amends the state’s Equal Pay Act and takes effect July 1, 2018. On Dec. 8, 2016, the Philadelphia City Council passed the Wage Equity Ordinance, banning employers from inquiring about an applicant’s wage history, retaliating against an applicant for failing to disclose such history, or relying on the applicant’s wage history in determining salary. Although the Philadelphia ordinance’s May 23, 2017, effective date has been stayed pending a judicial challenge, similar legislative efforts have been introduced in California, the District of Columbia and New Jersey, and already enacted in Puerto Rico.
What Lies Ahead for Employers?
Measures banning inquiries about or use of compensation history appear to be gaining momentum. These state and local measures are a reminder that employers increasingly must be aware of the employment laws in the specific localities where they operate, as they may be more expansive than federal law. Employers will need to evaluate their recruiting and hiring practices accordingly, especially regarding form employment applications and “routine” interview questions that could run afoul of the New York City law or those of other municipalities.