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New York City employers face new legal liability, as New York City joins New Jersey, Oregon, and Washington, D.C. in banning discrimination against the unemployed.  The New York City law, passed over Mayor Michael Bloomberg’s veto, applies to businesses with four or more employees and/or independent contractors in some cases.  The new law is effective on June 11, 2013, giving employers just a few months to evaluate their policies and get into compliance.

The New York City law is the most expansive in the nation.  Like similar laws in other jurisdictions, it prohibits employers from posting job ads that discourage the unemployed from applying.  Unlike the others, the law allows individuals to bring lawsuits and collect damages if they suffer discrimination on the basis of unemployment.  Given the high unemployment rates, this translates into a lot of potential liability for employers and even more opportunities for creative plaintiffs’ lawyers to sue.  Worse yet, the law allows recovery of attorneys’ fees, so like wage and hour litigation, these claims are self-funding and therefore very lucrative business for the plaintiffs’ bar.  Moreover, dozens of applicants could sue over a single position for which they were not selected.  Even if they do not ultimately prevail, defending such suits could be extremely costly.  And even if an employer hires an applicant who was unemployed, if it pays that person less than other similarly situated employees, the new employee could still successfully sue for damages.

The law allows employers to make decisions based on factors that are related to an individual’s unemployment.  For example, if an applicant lost her last job for chronic absenteeism, the employer may refuse to hire her because of its concerns over absenteeism.  Proving that the underlying cause of unemployment, rather than unemployment itself, was the reason for not hiring the person is likely to be an uphill battle.

Another unusual feature of this law is that it provides for disparate impact liability.  This means an employer cannot maintain a uniform policy that would tend to disfavor those who are unemployed, unless that policy is substantially job related.  One common practice that could run afoul of this law is credit checks for applicants.  Since prolonged unemployment may lead to problems paying bills, it is easy to see how a consistent policy disfavoring people with bad credit would tend to disfavor the unemployed, even if all applicants are screened.

The law provides both for private lawsuits in court and proceedings before the New York City Commission on Human Rights (“NYCCHR”).  The NYCCHR can require employers to change their discriminatory practices, can order monetary awards (including back pay, front pay, and emotional distress damages), can impose fines of up to $250,000 per violation, and can force the employer to hire the applicant!  Individuals who bring lawsuits in court can also recover punitive damages and attorneys’ fees.

How to Comply

• Determine whether the law applies to you.  The law applies to those with four or more employees, but “employees” under this law include individuals who carry out work “in furtherance of” your business, even if that person is an independent contractor.  However, if the independent contractor is an employer, do not count that person in your total.
• Scrutinize your job postings.  Could they discourage the unemployed from applying?  If so, remove any problematic language.  Discriminatory job postings are much easier to prove than discriminatory decision making, so this step should be your top priority.
• Remove discriminatory questions from your job applications or screenings.  If you use computer software to screen applicants, make sure it is not programmed to eliminate or penalize unemployed applicants.  Failure to do so could create disparate impact liability, potentially on a class-wide basis.
• Revise your company policies and handbooks to include unemployment status in your list of protected classes.  (But if you have operations in multiple jurisdictions, review this issue with counsel.)
• Train anyone involved in your on-boarding process that they cannot discriminate against the unemployed.  Think about all steps of the process so you can insure not only that your job postings are nondiscriminatory, but also that your interview questions are neutral and compensation is set without regard for unemployment status.  The law allows employers to inquire into the circumstances of an individual’s unemployment, but phrase your questions neutrally.  For example, “Why did you leave your last job?” is less objectionable than “Why are you unemployed?”
  • Consider promoting from within.  The law explicitly allows employers to favor or limit applicants to those who currently work for the employer.
• Document the legitimate, non-discriminatory reasons behind your decisions.  A quick internal memo can help establish the real reason you did not hire someone.  Even a handwritten note is better than nothing.

Before the ink is dry on this law, the New York City Council is separately considering a measure to ban credit checks by employers in most situations, so now is a good time to drop this practice if it is not substantially job related.

Brody and Associates regularly advises management on complying and remaining up to date with state and federal employment laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.