Just days before concluding its legislative session, the New York Legislature enacted a law focusing on an employer’s acquisition and use of applicant and employee wage and salary history when making decisions regarding hiring, promotion and retention.  As explained below, while styled as a salary history inquiry ban, the law actually goes further than local New York county and city prohibitions – including in New York City, Albany, Suffolk, and Westchester, as well as those enacted in other jurisdictions such as Massachusetts and California – by restricting not only inquiries, but also reliance on, such information in many cases where the employer happens to learn of wage and salary history information.  Governor Cuomo is expected to sign the bill, which will take effect 180 days after enactment.  Below, we outline the contours of the law and how employers will be affected, as well as next steps.

The law amends the New York Labor Law by adding a new Section 194-a, which will make it unlawful for an employer to:

1. Rely on the wage or salary history of an applicant in determining whether to offer the applicant employment or in determining the wages or salary of such individual. 

At first glance, compliance with this provision seems easy enough – do not ask for the information, and if you do come across it, do not rely on it.  But what if the applicant voluntarily discloses wage and salary history in the course of a salary negotiation?  Are employers required to ignore it?  It’s unclear.  The law includes the following exception:

Nothing in this section shall prevent an applicant or current employee from voluntarily, and without prompting, disclosing or verifying wage or salary history, including but not limited to for the purposes of negotiating wages or salary.

While this exception does not preclude an applicant from voluntarily providing his or her wage and salary history information, it does not go as far as explicitly permitting an employer to “rely” on the voluntarily disclosed information in setting the applicant’s wage or salary.  But why would the law explicitly permit applicants to disclose their wage and salary history if employers could not do anything with that information, including during the negotiation process?  This apparent inconsistency is of course problematic and also impractical.  Thus, if an employer comes across wage and salary history due to the applicant’s voluntary disclosure and still must ignore it, the New York State Department of Labor (DOL) should say so through appropriate guidance – or the DOL should follow the lead of the New York City Human Rights Law, which explicitly permits employer reliance where the employee discloses this information.  Either way, clarity is needed so that employers do not trip into non-compliance. 

2. Seek, request, or require, whether orally or in writing, the wage or salary history from an applicant or current employee as a condition to be interviewed, or as a condition of continuing to be considered for an offer of employment, or as condition of employment or promotion. 

This provision also may create tricky compliance challenges in certain situations.  For example, the law is unclear regarding whether an employer may ask the applicant or current employee about his or her salary expectations for the position, which the New York City Human Rights Law explicitly permits.  A strict reading of the state law does not appear to prohibit this question or a discussion around the same, so long as the employer does not in any way prompt the applicant or employee to disclose his or her wage and salary history.

Relatedly, when does an employer’s conversation with an applicant or employee cross over into wage and salary history territory?  May employers and applicants discuss the unvested equity or deferred compensation that an applicant may forfeit or have cancelled by virtue of the applicant's resignation from their current employer?  Does wage and salary history include other forms of compensation?  Finally, how does an employer guard against a violation when discussing the applicant or employee’s productivity during the interview, including regarding revenue, sales or other production reports?  Without appropriate guidance from the DOL, employers should think twice before exploring these areas with an applicant or current employee.

3. Seek, request or require the wage or salary history from others – i.e. from the applicant or current employee’s current or former employer or from another employee or agent of the applicant or current employee’s current or former employer. 

In other words, employers cannot seek to circumvent the law by asking a third party to provide the information that they can’t obtain directly from a potential employee.  This ban also applies to current employees seeking a promotion.  This seems to present a practical quandary for employers – if an internal candidate is applying for a promotion or transfer within the company, is it problematic for the company to provide their own current wage or salary to the person making the hiring or promotion decision?  And what if the person making the hiring decision already has access to that information as part of their job?  What if they are interfacing with others as part of the decision-making process and those other individuals (e.g. human resource personnel) also have access to the information?  What are an employer’s obligations in this regard?  Will employers have to wall off this information in a meaningful way and take other steps to make sure that the wage and salary history does not enter the conversation when discussing the candidacy? 

Further, while there is a limited carve-out to this provision – that is, where an applicant or current employee responds to an offer of employment or a promotion by providing his or her wage or salary history that exceeds the offered wage or salary, an employer may confirm such history with third parties – the provision does not go further than merely permitting such confirmation.  So again, we ask: what is an employer permitted to do with the wage and salary history information in its possession under these circumstances?  At least for applicants, is the employer still subject to the “reliance” prohibition discussed further above? 

4. Refuse to interview, hire, promote, otherwise employ or otherwise retaliate against an applicant or current employee: (i) based upon his or her prior wage or salary history; (ii) because he or she refused to provide prior wage or salary history information; or (iii) because he or she filed a complaint with the Department of Labor alleging a violation of this law. 

A violation under this provision or any of the other above provisions may result in a civil action in court for compensation for any damages sustained as a consequence of the violation, along with appropriate injunctive relief and reasonable attorneys’ fees.

Takeaways

As part of their efforts to come into compliance, employers should consider:

• The ways in which they currently seek and use wage and salary history information from applicants and current employees to determine any anticipated compliance gaps.  This may include, among many other things, a review of their application and promotion processes, policies and procedures. 

• Whether they want to utilize a uniform application and promotion process where they operate in other states with fewer or no salary history restrictions in place. 

• Implementing training for human resources, related professionals, and others involved in the hiring process who interface with each other and with applicants and employees regarding these issues.

• Revisiting their service relationships to ensure that their external recruiters have taken steps to come into compliance, and further that their services agreements include appropriate compliance acknowledge and allocation of risk in the case of non-compliance.

• Engaging a compensation consultant to discuss best practices for setting salary or salary ranges for a role.  Besides improving the chances that they are paying the “right” amount of compensation for a talented employee, it will make it easier for an employer to demonstrate that it relied on objective information rather than any wage or salary history of the applicant or current employee in making hiring and promotion decisions.

• Documenting applicant and employee hiring decisions to demonstrate the absence of any reliance on wage and salary history.