For decades, New York law had little to say about employer confidentiality rules or employee privacy rights. This void left employers with a free hand to impose strict confidentiality policies governing nearly every aspect of the employer's business, while facing few consequences if the employer trampled on an employee's privacy. In recent years, however, the legislative pendulum has swung in favor of employee protection, including when it comes to confidentiality and privacy. Currently, New York employers now face a number of rules and obligations that are not intuitive and may become traps for the unwary. Given the recent dramatic expansion of New York Labor Law §740, New York's whistleblower law, to protect the reporting of virtually any violation of law, employers ought to revisit their approach to confidentiality and privacy issues specific to New York to ensure that they are not taking unnecessary risks.

Pay Secrecy Policies

Starting in 2016, New York has sought to reduce pay disparities by making it unlawful for an employer to "prohibit an employee from inquiring about, discussing, or disclosing the wages of such employee or another employee." N.Y. Lab. L. §194(4)(a). In some ways, this law did not break new ground insofar as the federal National Labor Relations Act (NLRA) has long protected employees, both in unionized and non-union contexts, who engage in protected concerted activity regarding working conditions, including discussions about wages. But the NLRA lacks the enforcement teeth that are present in Article 6 of the New York Labor Law. Nevertheless, the still-prevalent practice of employers telling their employees not to share information about their pay is unlawful in New York and employers who continue to promulgate such policies are at risk.

That said, there is an open question as to whether this prohibition on pay secrecy extends to other forms of compensation, like equity awards, stock options, or carried interest. The term "wages" is defined in Article 6 to mean "the earnings of an employee for labor or services rendered, whether the amount of earnings is determined on a time, piece, commission, or other basis" (N.Y. Lab. L. §190(1)),  as well as "benefits or wage supplements," such as "reimbursement for expenses; health, welfare, and retirement benefits; and vacation, separation, or holiday pay" (N.Y. Lab. L. §198-c(2)). In other contexts, courts in New York have held that equity awards are not dependent on the employee's own efforts and are "incentive compensation" and, thus, do not constitute "wages" under Article 6. Guiry v. Goldman Sachs Co., 31 A.D.3d 70, 71 (N.Y. App. Div. 2006). Relatedly, even though discretionary bonuses have generally been held to fall outside the scope of "wages" (Truelove v. Ne. Cap. & Advisory, 95 N.Y.2d 220 (2000)), once such bonuses have been finally determined and are due and owing to employees, courts have construed those bonuses as "wages" (Ryan v. Kellogg Partners Institutional Servs., 19 N.Y.3d 1, 16 (N.Y. 2012) (collecting cases)). As such, depending on the precise nature of the incentive compensation program at issue, an employer's admonition to an employee not to share the details of their incentive compensation could also be unlawful.