Following a trend started last year in Massachusetts, the New York City Council recently passed a bill that will prohibit employers from inquiring about a prospective employee’s compensation history. While the new law, Introduction 2016-1253-A, is ostensibly aimed at eradicating disparities in pay based on gender, the law has broad implications for employers in New York City and portends a sea change in recruiting practices. As laws of this sort are novel and untested, the passage of the NYC law raises many questions for employers and, ultimately, for the courts who will undoubtedly be faced with resolving questions as to the meaning of the new law and possibly its constitutionality.
Effective October 2017 (180 days after Mayor de Blasio signs the bill), the law will amend the NYC Human Rights Law to make it “an unlawful discriminatory practice for an employer, employment agency, or employee or agent thereof: (1) to inquire about the salary history of an applicant for employment; or (2) to rely on the salary history of an applicant in determining the salary, benefits or other compensation for such applicant during the hiring process, including the negotiation of a contract.” The term “inquire” is defined to include questions directed at the applicant, requests made to other employers about the applicant and searches of public records for the applicant’s salary history. The term “salary history” is actually much broader than it sounds, and includes “wage[s], benefits, or other compensation,” but not any “objective measure of the applicant’s productivity such as revenue, sales or other production reports.”
As lawmakers and commentators have noted in relation to this and similar laws recently enacted in Massachusetts and Philadelphia, the intent of this broad prohibition is to help to prevent the propagation of any historical gender-based pay disparities. However, the law may drastically limit employers’ ability to engage in meaningful “price discovery” in the labor market in many circumstances far removed from the law’s ostensible purpose. As a consequence, many employers will find salary negotiations challenging and may increasingly rely on third-party compensation surveys focused on their particular industry or their own internal salary structures.