On May 4, 2017, New York City Mayor Bill de Blasio signed into law a bill that makes it an "unlawful discriminatory practice" for New York City employers to inquire about a job applicant's salary history, or to rely upon salary history in determining an applicant's compensation, unless the applicant offers such information voluntarily. The bill amends the New York City Human Rights Law and covers all private employers in New York City with four or more employees. It comes on the heels of similar legislation recently passed in the state of Massachusetts and the city of Philadelphia, and will go into effect on October 31, 2017. According to New York City Public Advocate Letitia James, who introduced the bill, the purpose of this new law is to stop a "cycle of wage discrimination" and to shrink the gender pay gap. It prohibits the common practice of using job applicants' past salary information to determine their future compensation—a practice that the bill's supporters argue has resulted in significant wage disparities between men and women.

Prohibited Inquiries

The law's key restriction provides that an employer may not "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 during the hiring process." Significantly, "inquire" is defined to include not only any question regarding salary history to the applicant or the applicant's current or prior employer, but also a "search of publicly available records or reports for the purpose of obtaining an applicant's salary history." "Salary history" is defined broadly to include an applicant's current or prior wages as well as benefits and any other form of compensation the applicant may have received.

Permitted Inquiries and Exceptions

Despite the restrictions noted above, the law expressly allows employers to "engage in discussion with the applicant about their expectations with respect to salary, benefits and other compensation, including but not limited to unvested equity or deferred compensation that an applicant would forfeit or have cancelled by virtue of the applicant's resignation from their current employer." If an applicant "voluntarily" and "without prompting" provides salary history, then such information can be used to verify the applicant's salary history and may also be used to determine the salary, benefits, and other compensation that the employer intends to offer the applicant. Moreover, the law permits employers to inquire about "any objective measure of the applicant's productivity such as revenue, sales, or other production reports" and inform applicants in writing or otherwise about the position's proposed or anticipated salary or salary range.

Notably, the legislation applies only to job applicants, not existing "internal employees transferring or promoted within an organization" or to "instances in which a state, federal, or local law specifically authorizes the disclosure or verification of salary history for employment purposes, or instances that specifically require knowledge of salary history to determine a prospective employee's compensation." The law also does not prohibit employers from conducting background checks, so long as they do not disclose the applicant's salary history.

Enforcement and Penalties

The New York City Commission on Human Rights is responsible for enforcing this new law and may impose a civil penalty of up to $125,000 for an unintentional violation, and up to $250,000 for a "willful, wanton or malicious act." Individuals also have a private right of action under the law and may seek back pay, compensatory damages, and attorneys' fees.

Employer Action Items

Employers in New York City should conduct a thorough review of their hiring practices and policies and promptly remove any questions addressing job applicants' salary histories. Specifically, employers are advised to ensure that employment applications, employee handbooks, and similar documents do not contain any prohibited inquiries. Employers also should notify all human resources professionals, recruiters, and company employees involved in the hiring process about their obligations under the new law and provide training on how to comply with its requirements.

Wilson Sonsini is closely following the implementation of this new law and similar laws throughout the U.S. For more information, please contact Marina Tsatalis or another member of the firm's employment litigation practice.