On June 11, 2013, New York’s ill-advised new law aimed at protecting the unemployed takes effect. Putting in place the most sweeping protections and rights for unemployed job applicants in the country, the new law may have a far-reaching adverse impact on New York City employers and economic development. On its face, New York’s new law is a well-intentioned effort to address the problem of long-term unemployment. In reality, however, it is a "misguided attempt," as Mayor Michael Bloomberg powerfully put it in his veto message, which, for several reasons, promises more lawsuits than jobs.

The mayor is not alone in his opposition, as various organizations, such as the New York City Bar’s Civil Rights Committee, have voiced their disapproval.

As an initial matter, there is little evidence that employers are screening job applicants based on their current employment status. Though long-term unemployment is certainly a problem, it is unclear whether it will remain so given New York City’s recent economic growth. On March 7, the New York State Department of Labor reported that New York has experienced 17 months straight of job gains, exceeding almost all other states (including New Jersey and Connecticut) in private sector job growth. Also that day, The Wall Street Journal reported that New York City has been the driver of New York’s recent growth.

In apparent recognition that laws prohibiting discrimination against the unemployed are misguided, most of the approximately two dozen federal, state and local proposals in the last couple of years targeting such "discrimination" have not won enough votes to pass in their respective jurisdictions. Notably, Governor Jerry Brown vetoed a bill passed by California’s state legislature aimed at curbing perceived "discrimination" against unemployed job applicants.

Further, the proposals that have passed elsewhere are much narrower than the law passed by the City Council. By way of comparison, New Jersey, Oregon and the City of Chicago merely banned job advertisements that state that the unemployed need not apply. The law passed in the District of Columbia is slightly broader, limiting consideration of an applicant’s unemployment status in adverse hiring decisions. However, none of the laws passed in other jurisdictions afford an unemployed job applicant the right to sue in a court of law.

In stark contrast, under New York City’s new law, any New York City employer with at least four "persons" may be sued in court or before the New York City Human Rights Commission for allegedly discriminating against a job applicant based on his or her unemployment status, a status expansively defined as any individual "not having a job, being available for work, and seeking employment." The new law does not just protect job applicants but also provides expansive anti-retaliation protections to employees who blow the whistle on discrimination against the unemployed.

In addition to recognizing claims for affirmatively refusing to hire the unemployed, New York City’s new law allows claims for disparate impact as well. In other words, employers can be held liable, often in a class action context, for making decisions which, although not intentionally discriminatory, nevertheless have an adverse effect on the unemployed. Given that any business, even in times of plenty, turns away far more applicants than it can hire, the prospect of frequent and frivolous litigation from this ill-conceived and overbroad law looms large.

Moreover, the new law’s "advertisement discrimination" provision ostensibly affords unemployed applicants the right to sue as well, which even many of the more plaintiff-friendly proposed laws to date have foreclosed. Assuming this provision is not invalid for want of standing, any unemployed job applicant, even one who does not formally apply for the job, could theoretically spot a "discriminatory" advertisement and file a complaint in court or with the commission.

Furthermore, unlike the other laws in effect, which limit the penalty for violations to a modest fine, under New York’s new law the commission or a court may award a number of generous remedies to litigants, including hiring, reinstatement or upgrading of employees, as well as monetary damages. In addition, fines as high as $250,000 may be imposed on employers found to have violated the law. Finally, individual employees involved in the hiring process also may be found liable in their official and individual capacities.

We note that there are exceptions to the new law that allow employers to consider a job applicant’s unemployment status (where there is a substantially job-related reason) and to inquire into the circumstances surrounding the applicant’s separation from his or her prior employment. The new law allows employers to restrict its applicant pool to current employees (internal hires) or to give priority to job applicants currently employed by the employer. The law also permits employers, as has always been their right, to set compensation or other terms or conditions of employment based on experience.

However, there are many vague provisions in the new law, including the scope of the definition of "unemployed" and "unemployment," that will complicate and increase the costs of compliance.

In sum, the new law’s expansive prohibitions and significant penalties will unduly constrain employers in selecting job candidates, leading to increased risks of poor hires and the elevated prospect of lawsuits from poor hiring decisions. This is of course bad for New York City employers and worse for business. Moreover, for all of the reasons mentioned, the new law may have the opposite effect of its intent, hardly the right policy outcome for New Yorkers.

Katharine H. Parker is a partner in the Labor and Employment Law Department at Proskauer Rose and co-head of its employment law counseling practice group. Daniel L. Saperstein is an associate at the firm’s Newark office.