Pretty soon, businesses won't be able to ask employees or job candidates about their salary history in New York City.
Business Insider spoke with Jason Habinsky, a New York-based employment lawyer and a partner at the law firm Haynes and Boone, about what organizations, employees, and job candidates can expect going forward.
Changes won't happen straightaway
To become a law, the bill still needs a signature from New York City Mayor Bill De Blasio. He's expected to sign the legislation shortly. After that, there will be a 180 day roll out period.
"It gives some time for employers to make sure they're in compliance," Habinsky says.
Employers will need to do a careful review
The new law will prohibit employers from requesting a job applicant or employee's salary history and using that information to determine their new salary. In order to comply with those new roles, Habinsky says that employers must make sure they do a thorough internal review.
"First of all, employers need to promptly audit and review their documentation regarding the hiring process," he says. "In other words, make sure that their job applications, their background check documents, the policies and procedures, all do not include questions regarding salary history and compensation history. They should do a very specific review and audit of their information to make sure those questions aren't included."
He also notes that employees, especially human resources personnel or any staffers involved in the hiring process, should probably receive additional training.
"Make sure they know about the new law and what it entails and what it prohibits," Habinsky says. "Make sure those employees aren't asking those questions or addressing those questions in interviews during the hiring process."
... and check with their third-party recruiters, hiring firms, or background check companies
"Employers should make sure to be in communication with any third parties or outside vendors who participate in the hiring process, if they use placement firms or recruiters, to make sure those organizations or individuals aren't supplying this information," he says. "Even if the employer isn't asking about or looking for this salary information, all it would take is for a recruiter to send over the information in an email or document."
There are a few exceptions to the law
The law doesn't go both ways. Employees and job candidates are still free to share their salary history.
"Then, in fact, the employer has that information and can react to that and use that," Habinsky says. "That's a clear exception in the law."
What's more, employers can ask an employee or prospective hire about their expectations regarding compensation, without asking about prior salaries.
"There can be some discussion, but you have to be very careful not to cross the line," he says.
The penalties for violating the ban are pretty serious
Habinsky says that the law essentially amends the New York City Human Rights Law, which prohibits discrimination in several categories, including employment.
As a result, there are two ways in which individuals can bring action against employers who violate the rule. People can file an action with the City Commission on Human Rights, who would investigate their claims. If city officials found probable cause for a violation, a hearing would take place and the commission would determine whether the employer was liable.
Individuals can also file a complaint in court. Either way, if the city or court rules in favor of the plaintiff, they could be in line to receive damages. The city can also choose to issue civil penalties against the employer. Habinsky says that if the city found that the employer was "willful and malicious" about violating the law, the penalties could clock in at $250,000.
It's important to watch what happens in Philadelphia
As Philly.com reported, Philadelphia's Chamber of Commerce is pushing back against a similar ruling by stating their plans to file a lawsuit against the city.
"There's definitely two sides to the argument," Habinsky says. "Some employers will see this as depriving them of information which they could use to make good decisions."
He says that it's possible that some entity will attempt to pursue similar action in New York City, but they might be waiting to see the outcome of the Philadelphia suit.
The legislation could clear the way for big lawsuits
Habinsky broke down a hypothetical scenario involving an employer that breaks the law by leaving a question about salary information on their job applications. He says that the nature of the rule could leave such an organization open for a major lawsuit.
"That's not just a violation against one person, but against every employee they've hired during that period of time," he says. "It does open up the door for group actions or collective actions."
It could also have an impact beyond New York
Many international and national businesses operate within New York City. As a result, the law may end up sending aftershocks far beyond the Big Apple.
"One easy way to make sure you're in compliance with employment laws nationwide or state-wide, depending on how vast your business is, is to pick the strictest law and then comply with that across the board," Habinsky says. "In other words, even if other states or cities don't have a requirement or a ban on requesting salary information, you apply it universally or uniformly, outside of New York City as well. It's a lot easier to administer and there are also good reasons for doing it. The purpose of the law is to not perpetuate discrepancies or gaps in pay and equity. There's a good reason behind it and you can accomplish that beyond the state or city where it's required."
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