Alert November 02, 2017

NYC Ban on Salary History Inquiries

Summary

Effective October 31, 2017, under a new provision of the New York City Human Rights Law (NYCHRL), New York City employers may no longer inquire about an applicant’s salary history during the hiring process or rely upon his or her salary history in setting the applicant’s compensation (the “NYC Salary History Law” or the “Law”). In issuing guidance under the Law, the New York City Commission on Human Rights (the Commission) has taken an expansive view of its scope and jurisdiction. All employers should be aware of the potential application of this Law to conduct or to positions outside of New York City and its implications not just for the hiring process but for corporate transactions, as described more fully below.

Prohibited Inquiries and Use of Salary History

Prohibited Inquiries. Under the new Law, the text of which is available here, employers may not “inquire” about the “salary history” of an applicant for employment, in writing or otherwise, whether this inquiry is made to the applicant, to the applicant’s current or prior employer, or to a current or former employee or agent of the applicant’s current or prior employer. Inquiries also may not be made by a search of publicly available records or reports for the purpose of obtaining an applicant’s salary history. “Salary history” includes the applicant’s current or prior salary or wage rate, benefits or other compensation but does not include any objective measure of the applicant’s productivity, such as revenue, sales or other production reports.

Application Forms. According to the Commission’s recently issued guidance in the form of answers to Frequently Asked Questions (FAQs), a job application form may not include a request for information about an applicant’s salary history, even if the employer makes it clear that a response is voluntary. Moreover, an employer using a multi-jurisdiction application form with a boilerplate request for salary history information cannot avoid liability by adding a disclaimer that individuals in New York City or applying for jobs in New York City need not answer the question.

Prohibited Use of Salary History. Further, in the event that an employer inadvertently becomes aware of an applicant’s salary history (such as from the results of a permitted background check or an attempt to verify the applicant’s non-salary-related information), the employer may not rely on the salary history of the applicant in determining the salary, benefits or other compensation for such applicant during the hiring process, including the negotiation of a contract.

Permitted Inquiries and Use of Salary Information

What Is Not “Salary History.” While employers are prohibited from inquiring about salary history, employers may inform the applicant about the position’s proposed or anticipated salary or salary range and may inquire about the applicant’s salary expectations, 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 his or her current employer. The FAQs clarify that prospective employers may also ask applicants about the value of competing offers from other prospective employers or about counteroffers from the applicant’s current employer. Employers may also specifically inquire about objective indicators of the applicant’s work productivity, such as revenue, sales, profits generated, books of business, or production reports. Salary history may also be used by a current employer with respect to internal transfers or promotions and by prospective employers where specifically authorized by federal, state or local law.

Voluntary Disclosures. Further, if an applicant, voluntarily and without prompting, discloses his or her salary history, the employer may consider the salary history in determining the salary, benefits and other compensation for such applicant, and may verify such applicant’s salary history. In the FAQs, the Commission has clarified that an applicant’s voluntary disclosure is “without prompting” if the average job applicant would not think that the employer encouraged the disclosure, based on the overall context and the employer’s words or actions.

Background Checks

The Commission reminds employers in the FAQs that the NYCHRL places limitations on when and under what circumstances employers may initiate background checks related to criminal history and credit history. Whether a background check is run before or after a conditional offer of employment, the Commission recommends that employers specify to reporting agencies that information about salary history be excluded from the report, unless it is made to verify salary history information that was disclosed voluntarily and without prompting. Similarly, the Commission notes that even after a conditional offer is made and compensation levels are set, an employer may not ask for a W-2 to verify salary history except to verify salary history representations disclosed voluntarily and without prompting, or unless otherwise required by local, state or federal law.

Coverage

Covered Employers and Employees. This Law applies not only to employers but also to employment agencies and employees or agents of employers and employment agencies. Further, while the Commission’s Employer Fact Sheet states that all employers with at least one employee in New York City must comply, as discussed below, all employers conducting interviews in New York City are expected to comply with the Law. The Commission’s Job Applicant Fact Sheet clarifies that the Law protects applicants for new employment in New York City, regardless of whether the position is full-time, part-time, or an internship, and that it also protects independent contractors who do not have their own employees.

Former Employers. Further, while the Commission has acknowledged that the Law does not generally apply to former employers who disclose salary history information to a prospective employer, it has stated that those other than the hiring employer can be held liable if they intentionally aid and abet a violation of the Law.

Expansive Reach of the Law

In interpreting the reach of the NYC Salary History Law, the Commission has taken the position that the Law may apply if prohibited conduct occurs during an in-person conversation in New York City (even if the job is not in New York City and the applicant is not a New York City resident) or if the impact of the prohibited conduct is felt within New York City (even if the prohibited salary inquiry takes place outside New York City). The Commission clarifies that mere New York City residency by an applicant, without more (such as a job or interview in New York City), will generally not be enough to establish impact in New York City.

Corporate Acquisitions

In the FAQs, the Commission clarifies how the Law applies in the context of corporate acquisitions. An acquiring company may obtain salary information about the employees of the target as a part of the due diligence process, because the target’s employees are not considered “job applicants” for purposes of the NYC Salary History Law. Further, the acquiring company may rely on salary history information in setting the salary of the employees it will be absorbing from the target, if it will be absorbing them and making compensation and structural decisions on a non-individualized basis. This would typically occur in a stock transaction. However, if the employees of the target company are asked to interview for positions with the acquiring company, as might occur in an asset deal, the Commission recommends that any salary information obtained during the due diligence process not be shared with hiring managers making decisions about compensation.

Consequences of Non-Compliance

This Law is an amendment to the NYCHRL, which is an anti-discrimination law with broad enforcement provisions. Individuals may bring a civil lawsuit for violations of the Law or file a complaint with the Commission. In a civil action, plaintiffs may seek damages, including punitive damages, injunctive relief, and such other remedies as may be appropriate, including attorneys’ fees and costs at the court’s discretion. The Commission has authority to award injunctive relief, back pay, front pay, compensatory damages, attorneys’ fees and costs, as well as the authority to impose civil penalties of up to $125,000 and, in the case of a “willful, wanton or malicious act,” up to $250,000.

What Should Employers Do to Comply with the Law?

  • Employers hiring for positions in New York City or conducting interviews in New York City should review their hiring practices, including training hiring managers and interviewers, to focus questions on the applicants’ skills, qualifications and salary expectations and the anticipated salary of the position, instead of the applicant’s current or former salary, and to prohibit the consideration of any inadvertently obtained salary history information when setting compensation.
  • Employers should also ensure that any agents, recruiters or headhunters involved in the recruitment process are complying with the Law.
  • Employers should review any job application forms which may be used for New York City positions or for interviews which take place in New York City to remove any request for salary history information, even where the form states that disclosure is voluntary or not required for positions or interviews in New York City.
  • When conducting background checks through reporting agencies, employers should specifically request that any salary history information be excluded from the report.
  • When providing references for current or former employees, employers should ensure that they have been provided with written authorization from the current or former employee, especially in connection with any request for salary information.
  • Companies that may be a party to a corporate transaction should be aware of potential obligations under the Law, particularly if employees of a target company will be interviewing with the acquiring company, either for positions in New York City or in interviews conducted in New York City.

If you have any questions or need assistance implementing compliance with the NYC Salary History Law, please contact Albert J. Solecki, Jr., Eric D. Roth, Jeehye Park or any other Goodwin employment law specialist.