Joining the trend that began in Massachusetts and has spread to Philadelphia, New Orleans, and Puerto Rico, New York City is the next city to restrict employers from inquiring, at any stage of the hiring process, about a job applicant's salary history. Proponents of these laws claim they will foster gender pay equity and narrow the pay gap between the sexes; critics assert that such laws violate free speech.

What Does the New York City Law Say?

A challenge by business groups seems likely, but unless or until restricted, the new law is scheduled to become effective October 31, 2017. If implemented, New York City's law would prohibit an employer, employment agency, employee, or agent from both inquiring about a job applicant's salary history and relying on a job applicant's salary history when determining his or her salary amount at any stage in the employment process, including when negotiating a contract. The law also restricts employers from conducting a search of publicly available records or reports for the purpose of obtaining an applicant's salary history. The law relates to base salary, benefits, and other compensation; it does not include any objective measure of the applicant's productivity, such as revenue, sale, or other production reports. Only applicants for jobs located in New York City are covered by the law. The law becomes effective in 180 days, or on October 31, 2017.

Are There Any Exceptions?

Yes. If the applicant voluntarily discloses his or her salary history to a prospective employer, the employer may consider it when determining the candidate's compensation. Employers are also permitted to discuss salary, benefits, and other compensation expectations with the applicant, as well as any unvested equity or deferred compensation the applicant would forfeit or have cancelled if he or she were to resign from his or her current employment.

Notably, the law does not apply to current employees applying for an internal promotion or transfer. It also does not apply to New York City employers acting pursuant to any federal, state, or local law authorizing the disclosure or verification of salary history or requiring knowledge of salary history for employment purposes, and it does not apply to public employment.

What Do We Need to Do?

Stop asking job applicants about their salary history. Modify and update your employment application (as we discussed in a previous client alert, check to be sure you've already removed questions about prior convictions), and make sure anyone conducting a background check on your behalf excludes inquiries that relate to a job applicant's salary history. Remove salary history from the information about which your HR department reports in response to the reference check of a former employee's prospective new employer. Employers are still free to communicate salary ranges and expectations to, and discuss them with, job applicants.

What's the Penalty if We Violate the Law?

The new law amended the New York City Human Rights Law ("NYCHRL"), which imposes individual liability and can result in an award of punitive damages and civil penalties if violated. Employers can be sued either in court or through the filing of an administrative charge with the New York City Commission on Human Rights. Under the NYCHRL, penalties of up to $250,000 are available for willful, wanton, or malicious acts.

What's Happening in Other States and Cities on This Issue?

As previously noted, the Massachusetts Pay Equity Act (effective in July 2018) is the first state law in the country to prohibit salary history inquiries. The law passed with bipartisan support.

By contrast, there is much greater resistance to such a law in Philadelphia, where the Chamber of Commerce for Greater Philadelphia filed suit on April 6, 2017, challenging the law as violative of the First Amendment.

In New Jersey, Governor Christie conditionally vetoed a similar law, and the state senate was unable to override the governor's veto. At this time, further action on the issue in New Jersey seems unlikely, at least until after the November 2017 election.

In California, variations on the same concept have made their way through the legislative process, including prohibitions on paying someone less for substantially similar work, but no California law currently prohibits employers from asking about salary history.

Similar legislation has been proposed on the national level, but passage seems very unlikely in the current political climate.

If you have questions about compliance with the new law or any other employment-related compliance matter, please contact Julie L. Werner or any other member of Lowenstein Sandler's Employment Counseling & Litigation Practice Group.