New York State Passes Salary History Inquiry and Wage Differential Prohibitions

On July 10, 2019, Governor Andrew Cuomo signed two bills amending New York State labor law. Effective October 8, 2019, employers will be prohibited from paying employees within a protected class a lower wage than employees not in that protected class for equal work or substantially the same work. Effective January 6, 2020, employers will be prohibited from requesting, requiring or relying on wage or salary history from applicants or current employees seeking employment, continued employment or promotion. New York's stated purpose of the laws is to ensure equal pay for equal work and prevent wage discrimination.

Employers with operations in New York should immediately review their recruiting and hiring practices and consult with legal counsel to ensure further compliance with the new legislation.

For your convenience, an overview of each law is below.

Salary History Inquiry Ban

What Inquiries Are Banned?

The law bans employers from seeking, requesting or requiring disclosure of wage or salary history from applicants or current employees as a condition to be interviewed, considered for an offer of employment, employed or promoted, with few exceptions. This includes asking applicants, current employees, current or former employers, current or former employees, or agents of the applicant or current employee's current or former employers. Employers also may not rely on salary history in determining whether to offer employment or in determining an individual's wages or salary. Employers may not refuse to interview, hire, promote or otherwise employ, or otherwise retaliate against, applicants or current employees based on their salary history, or based on their refusal to provide salary history.

May an Employer Ever Consider Salary History?

Notwithstanding the above, an applicant or current employee may "voluntarily, and without prompting" disclose or verify salary history for the purposes of negotiating salary with employers. Employers can only confirm salary history if an offer of employment with compensation is made to an applicant or current employee and the applicant or employee provides his or her salary history in response to support a higher salary than was offered.

When Does the Ban Apply?

The ban applies during all stages of employment, including hiring, continued employment and promotion.

What Are the Penalties for Noncompliance?

An applicant or current or former employee may bring a civil action for damages sustained, and may seek injunctive relief or attorneys' fees if he or she prevails. Damages may also include the full amount of any underpayment of wages, prejudgment interest and liquidated damages.

How Is This Different From the New York City Law?

Employers with employees in New York City are already subject to the New York City salary history ban, but will want to note that this new state law imposes additional restrictions. Unlike the New York City law, the New York State law applies to current employees and during internal transfer or promotion processes. The New York State law also prohibits employers from refusing to interview, hire or promote an applicant or current employee based upon salary history, based upon a refusal to provide salary history or based upon the employee filing a complaint alleging a violation of the law. The New York State law further restricts when an employer can confirm salary history; under state law, an employer may only confirm applicants' or employees' salary history if they voluntarily provide their salary history to support a higher salary than was offered at the time of receiving an offer of employment.

How Can Employers Prepare for Implementation of the Ban?

Employers should engage in a few best practices to prepare for the ban, including:

• review applications, hiring practices, employee review practices, promotion practices, and related policies to eliminate all questions regarding wage or salary history;
• review the new legislation with all people involved in the recruiting, hiring and promotion processes and make sure that they are properly trained;
• be careful not to "prompt" an applicant or employee into disclosing salary history;
• ensure that salaries are established in compliance with all laws, including the federal and state Equal Pay Acts and, if relevant,New York City's salary history ban laws; and
• consider setting salaries or salary ranges for a position at the onset of the hiring process.

New York employers with employees in other states should be aware that salary history inquiry bans have been adopted recently in other states and cities, and should consult with legal counsel regarding compliance with these laws.

The law will go into effect on January 6, 2020.

Wage Differential Prohibition

What Pay Practices are Prohibited?

This law expands the existing New York State prohibition on wage differentials based on an employee's sex. Under the new law, an employer cannot pay employees within a protected class a wage rate less than that of employees not within the same protected class or classes. This prohibition applies to employees who either perform equal work on a job requiring equal skill, effort and responsibility performed under similar working conditions or perform substantially similar work, when viewed as a composite of skill, effort and responsibility, performed under similar working conditions.

What Are Protected Classes Under This Law?

Protected classes include age, creed, race, color, national origin, sexual orientation, gender identity or expression, military status, sex, disability, predisposing genetic characteristics, familial status, marital status, and domestic violence victim status. Employees and interns can be members of protected classes.

Are Wage Differentials Ever Permissible?

Exceptions to the law allow an employer to pay differential wages when the differential is based on a seniority system, a merit system, a system which measures earnings by quantity or quality of production or a bona fide factor other than status within a protected class.

Education, training and experience are considered bona fide factors. Bona fide factors should be related to the position in question and consistent with "business necessity," which the law defines as a factor that bears a "manifest relationship to the employment in question." Bona fide factors cannot be derived from or based on protected group status.

Can Employees Challenge Employer Practices Allowing Wage Differentials?

Yes. An employee can challenge an exception listed above by demonstrating that an employment practice used by the employer causes a disparate impact on the basis of protected class status, that an alternative practice exists that would serve the same business practice and not produce a differential and that the employer has refused to adopt the alternative practice.

What Are the Penalties for Noncompliance?

An employer who fails to pay the wages of employees or differentiates in rate of pay because of protected class status faces penalties of $500 per violation of the law. In addition, employees can bring a civil action to recover the full amount of any underpayment of wages, prejudgment interest, liquidated damages and reasonable attorneys' fees. The liquidated damages can equal up to 100% of the total amount of wages found to be due, or up to 300% if the violation is willful.

How Can Employers Prepare for Implementation of the Prohibition?

Employers should engage in a few best practices to prepare for this change, including:

• review employee compensation data to identify compliance risks due to wage disparities among employees with similar levels of responsibility and performing similar tasks;
• review formal and informal compensation policies, job descriptions, employee performance review policies and other related policies to ensure that the policies articulate bona fide factors to explain wage differentials identified;
• review employment and compensation policies to eliminate policies basing wage on factors such as salary history, which may be derived from protected group status; and
• consider setting salaries or salary ranges for a position at the onset of the hiring process and documenting and retaining records of wage changes over time.

The law will go into effect on October 8, 2019.

© Arnold & Porter Kaye Scholer LLP 2019 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.