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Legal Update - November 2017 Newsletter

Yogi Patel - Thursday, November 02, 2017

Dear valued clients and supporters: This month's newsletter will focus on a significant law that impacts most NYC employers and employees that went into effect as of this morning (October 31, 2017).

NYC Salary History Law

Subdivision 25 to the NYC Administrative Code (Section 8-107) went into effect this morning. Under this new law, employers are prohibited from inquiring about or relying on a prospective employee's salary history prior to making an offer. As a practical matter, this new law changes how salaries are typically set and negotiated. The law is complex and broad reaching. Not only does it apply to direct employers, but agents, recruiters and headhunters. The liability flows through to all parties involved in the hiring process.

The law governs compensation broadly, meaning what type of questions an employer may ask about the prospective employees unvested equity, deferred compensation, commission, bonuses or percentage of profit - in connection with their prior employment - before making an offer of their own. The law does not place restrictions on how an employer may utilize prior salary history if it is "volunteered" by the prospective employee, however, the law prohibits the employer from "prompting".

The New York City Human Rights Commission is charged with enforcing the law and the penalties for violating the Act can include a civil penalty of $250,000.00, compensatory damages, attorney fees, hiring or reinstatement, award of back and front pay.

In order to comply with the law, employers should consider focusing questions on an applicants’ salary demands, skills, and qualifications during the hiring process instead of questions about prior compensation; Consider revising job applications and other forms to ensure that the form does not include questions about applicants' salary history (even if such questions are framed as "voluntary"); And finally appropriately train interviewers and modify written polices prohibiting inquiries about applicants' salary history.

For employers that engage headhunters, recruiters or agents - and intend on relying on representations made by headhunters, recruiters or agents that the applicant has consented to the disclosure of the applicant's salary history when engaging in negotiations on behalf of the applicant, employers should consider obtaining written authorization of release of salary history information directly from the prospective employee before relying on the representation of headhunter, recruiters or agents to mitigate their liability.

Employees should consider utilizing this law to their benefit when engaging in salary negotiations. Some employees, specifically executives whose compensation includes stock options and vesting restrictions may voluntarily discuss the impact of their prior employer's policy on their compensation pertaining to options - without "volunteering" other aspects of their compensation (base pay, commission, bonus).

Employees who are faced with impermissible questions about salary history, during the heat of the moment, might consider responding as follows (suggested by NYC Human Rights Commission):

  • In response to a question about what you currently make, you can reframe the issue in terms of your salary expectations or demands and not disclose your salary history.
  • Indicate that you’d like to discuss your compensation based on the requirements and responsibilities of the job for which you’re applying, which may differ from your prior work.
  • Reframe the question to focus on the value you can bring to the job and what you can add to the company, rather than on what you made previously.

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.

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