The inevitable question asked by most New York City employers, including real estate owners and property managers, when interviewing a potential employee has been “What did you make at your last job?” That question, however, should be immediately eliminated from your repertoire or your company may face stiff fines from New York City and potential lawsuits from applicants. As of Oct. 31, 2017, the New York City Salary History Law took effect, and it prohibits New York City employers of any size from asking about, relying on, or verifying a job applicant’s salary history during the hiring process. To eliminate your potential risk exposure, you should be aware of the mechanics of the new law, what is prohibited under the law, what is permissible under the law, and the potential fines and lawsuits you may face if you do not comply.

Local Law No. 67 amended the New York City Administrative Code (Code) and added a new subdivision 25 to Section 8-107 of the Code to prohibit employers from inquiring about or relying on a prospective employee’s salary history. Section 8-107(25)(b) of the Code provides, in relevant part, that

[I]t is 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.

“Salary history” under the Code is broadly defined as an “applicant’s current or prior wage, benefits, or other compensation.” The law does not apply to applicants for internal transfer or promotion within their current employer. You should also be aware that, if a job applicant is a New York City resident and applies for a job outside of New York City, but the inquiry about salary history occurs in an interview in New York City, the law may apply.

What Is Prohibited Under the New Law

Under the new law, you cannot inquire about a potential applicant’s salary history in any form. As an example, let’s say you are hiring a potential superintendent for one of the buildings you own or manage. You cannot, either verbally in an interview or on an application form, ask the applicant what he made in his last job, either in terms of his salary or any benefits (such as a pension/401K). You also cannot ask his former or current employer about his salary history or search public records for information about this history. If you do, for example, a Google search of your potential superintendent and accidentally come across his salary history, you cannot rely on that information in determining what to offer him in terms of salary and benefits.

What Is Permitted Under the New Law

There are, however, exceptions under the law that give a New York City employer some room to maneuver. You can ask your superintendent applicant about his salary expectations and the proposed or anticipated salary for the position. You can discuss with him whether he will be forfeiting equity or deferred compensation if he takes the job. As a prospective employer, you can also ask him about whether he has received any competing job offers or counteroffers from his current employers and the value of these offers.

If the superintendent candidate “voluntarily and without prompting” discloses his salary history, you can then consider his salary history in determining what to offer him in terms of salary, benefits, and other compensation. The New York City Commission on Human Rights (CCHR) guidance states that “without prompting” means that “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.”

As an employer, you can continue, under this law, to ask the applicant’s current and former employers about non-salary information such as responsibilities and achievements under their employ. Using the superintendent applicant as an example, you can inquire as to his prior work hours and the specific job tasks (i.e., garbage removal, repair work, etc.) that he performed for his current or former employer.

Potential Penalties for Noncompliance

An employer that fails to comply with Section 8-107(25) of the Code opens itself up to possible CCHR-imposed fines and potential lawsuits. CCHR may impose a civil penalty of up to $125,000 for an unintentional violation of the new law and of up to $250,000 for a violation that it finds to be willful and malicious. A potential applicant may also commence a lawsuit against the employer and, if successful, may be awarded, among other things, punitive damages, compensatory damages, and attorney’s fees.

Tips for Compliance

Given the hefty civil penalties and potential damage awards for noncompliance with the Salary History Law, you should make sure that your company takes proactive steps to reduce any potential exposure. I would recommend the following:

• Revise all your employment applications and background check forms to ensure that they do not ask about salary history;
• Make sure that any job advertisements (whether in print or social media) do not ask about salary history;
• Train your staff who are involved in the hiring/interview process not to ask about salary history and not to ask questions that would “prompt” an applicant to discuss this history; and
• If you use a third party in your hiring process (such as a recruiter or temp agency), confirm in writing with them that they are not asking about salary history in the interview process or making such an inquiry in any advertisement they run on your behalf.

In short, if you are aware of this new law and ensure that the correct steps are taken to stay in compliance with it, you will be able to continue to vet candidates accordingly and hopefully bring the best and most capable candidates aboard your company. Happy Hiring!

For further information: See NYC’s webpage, Salary History Law: Frequently Asked Questions.