As we advised in our May 2017 Legal Update, New York City's new law prohibiting employers from asking about a job applicant's current or prior compensation becomes effective on October 31, 2017. In summary, the new law makes it a discriminatory employment practice under the New York City Human Rights Law for an employer to (i) seek information about the current or prior wages, benefits or compensation of a job applicant or (ii) rely on the salary history of a job applicant when determining said applicant's salary, benefits or compensation during the hiring process.

Earlier this month, the New York City Commission on Human Rights issued answers to frequently asked questions (FAQs) concerning the new law. The following is a summary of some of the key issues addressed in the FAQs.

Coverage of the Law

The law covers employers of any size that are hiring job applicants in New York City and protects applicants for jobs in New York City. This raises questions about the applicability of the law to residents of New York City applying for jobs outside of the city and interviews that occur outside of New York City for New York City jobs. According to the Commission, if an inquiry about a job applicant's salary history occurs during an in-person conversation in New York City for a position outside of New York City, it will likely take jurisdiction—i.e.,  apply the new law—because the impact of the unlawful discriminatory practice is felt in New York City. Similarly, if the unlawful inquiry is made outside of New York City for a job in New York City, the law will apply because the impact of the unlawful discriminatory practice is felt in New York City.

Recruiters and Headhunters

The law applies to headhunters, employment agencies and other agents of an employer or employee. Such agents of employers or employees may only disclose a job applicant's salary history if they have the consent of the job applicant to do so. If an agent discloses the salary history of a job applicant without the applicant's permission, the agent may be liable for aiding and abetting an unlawful discriminatory practice. To protect against liability, agents are encouraged to obtain the job applicant's written consent authorizing the disclosure of his or her salary history before making any disclosure to the prospective employer.

Salary Discussions and Background Checks

While prohibited from inquiring about salary history, an employer may ask for an applicant's compensation expectations or demands. Nevertheless, if the job applicant discloses his or her salary history "voluntarily and without prompting," the employer may rely on and/or verify a job applicant's salary history.

Further, employers may not seek information about salary history from sources other than the applicant, such as by searching public records, asking others about an applicant's salary, requesting an applicant's W-2 form or searching the internet for salary information about a specific applicant. If an employer accidentally learns information about the applicant's salary history, that information may not be relied upon in determining the compensation to offer the applicant.

Employers may not make inquiries about salary history after a conditional offer has been made, unless it is to verify representations by applicants who disclosed their salary history voluntarily and without prompting. Therefore, the Commission recommends that employers who use reporting agencies to do background checks on prospective employees explicitly request that salary history be excluded from such reports.

The only point at which an employer may ask an individual about his or her salary history is after that person has been hired and is currently employed with the employer making the inquiry.

Corporate Acquisitions

In the context of a corporate acquisition, employees of the target company are not considered "job applicants" for the purpose of the salary history law so that salary information may be released to the potential buyer as part of the due diligence process. Although a buyer of a business may rely on salary history information when absorbing employees of the target company and making structural and compensation decisions on a non-individualized basis, the Commission recommends that salary information disclosed during the due diligence process not be shared with hiring managers making compensation decisions for those who will be asked to interview for positions with the acquiring company.

Best Practices

Employers should take the following steps to ensure compliance with the new salary history law:

  • Train their hiring staff concerning prohibited inquiries about salary history.
  • Confirm outside recruiters' knowledge of and compliance with the salary history law.
  • Create written policies that prohibit salary history inquiries.
  • Modify employment applications to eliminate inquiries concerning past compensation.

Employers and employment agencies should consult with counsel to ensure compliance with this significant change in the law. Please feel free to reach out to Pryor Cashman with any questions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.