[Photo: U Can't Touch This, by MC Hammer / Pininterest]

New York City has a new law on the book – Local Law 67 - that prohibits employers from inquiring about a job applicant’s salary history during all stages of the interview process. The new law also makes it an unlawful discriminatory practice to rely on a job applicant's salary history in determining the applicant's salary, benefits or compensation. The law will take effect in November 2017.

More than 20 states, from California to Georgia to Vermont, are considering similar legislation that would bar employers from asking about a job applicant's pay history, according to the National Conference of State Legislatures. New York City joins Massachusetts and Philadelphia, which already have those laws on the books.

The stated purpose of the new law is to “reduce the likelihood that women will be prejudiced by” their salaries at previous jobs, and “to help break the cycle of gender pay inequity.”  This point is confirmed by the NYTimes, which refers to an August 2016 study commissioned by NYC Public Advocate Letitia James, who sponsored the bill. The study found that women in New York State get paid, on average, only around 87% of what men get paid. Women in New York State earn collectively some $20 billion less annually than do men. In New York City, women get paid nearly $6 billion less than men annually.

There are several carve-outs, or notable exceptions, according to a DLA Piper ‘Alert’:

• The ban does not bar employers from considering salary history in determining the applicant's salary or compensation if the applicant has "voluntarily and without prompting" disclosed his or her salary.
• Employers also remain free to "engage in discussion" with an applicant about his or her "expectations with respect to" salary and compensation, "including but not limited to unvested equity or deferred compensation that an applicant would forfeit or have cancelled by virtue of the applicant's resignation from their current employer."
• Employers are still permitted to conduct background checks of applicants, but if such background check discloses an applicant's salary history, the employer may not rely on such disclosure for purposes of determining an applicant's compensation.
• The ban on salary inquiries would not extend to applicants for internal transfers or promotion with their current employer, or to public employees whose salary or compensation is determined under a collective bargaining agreement.

WALL STREET REACTION.    Wall Street, where employee compensation is generally the largest single expense, is annoyed with the new law. For one thing, Wall Street execs don’t like the city telling them what they can and can’t do when it comes to what to pay people. Second, many execs complain that the new law will make it harder for them to recruit and to pay the best people because they no longer will be able to have the typical compensation discussion. Alicia Glen, a former Goldman executive who’s now Deputy Mayor in charge of Housing and Economic Development, counters those arguments:

“We have to break the cycle of pay discrimination. Every firm is grappling with how to retain and promote more women into their senior leadership - this is part of the solution. Having spent more than a decade on Wall Street, I fundamentally believe this industry will be stronger when women up and down the ladder are compensated fairly.”