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New York City has become the latest area to pass a law banning what has been called “unemployment discrimination.” 

So just what is unemployment discrimination? It refers to denying candidates employment based solely on the fact that they are not currently employed. It’s no secret that companies have probably always preferred actively employed candidates, but some companies took it a step further in the wake of the recession by stating in job postings that unemployed candidates would not be considered.

The practice had people crying foul because many workers on the employment lines were victims of the recession’s mass layoffs and were not necessarily poor performers. As a result, three states have passed laws against unemployment discrimination. In general, these laws prohibit companies from posting ads stating that current employment is a job requirement or that unemployed candidates won’t be considered.

New York City has become the first city to pass such a law, which took effect on June 11. The law makes it illegal to base employment decisions (hiring, compensation, terms, etc.) on a person’s employment status. According to the Associated Press, NYC’s law is the most far-reaching of the unemployment discrimination laws as it is the only one that allows applicants to sue for damages.

While it may not be spelled out in writing, many companies have a strong preference for currently employed candidates. They may even go as far as to tell recruiters not to present any unemployed candidates. Recruiters should make clients aware of the laws against unemployment discrimination and of the drawbacks of arbitrarily discounting the unemployed. Even if it is not illegal where your clients do business, overlooking candidates based solely on their employment status is not the best business strategy. There are a number of reasons a candidate could be laid off that have nothing to do with their quality of work.

If you have a candidate you feel strongly about but who is being overlooked due to their employment status, you may want to consider offering that candidate on a contract-to-direct basis. Contract staffing services allow clients to “try-before-they-buy.” If the candidate doesn’t work out, they can simply end the contract and try someone else. But if they have found a great worker, they can extend the direct hire offer, and in most cases you can earn a conversion fee in addition to the hourly income you make during the contract period.

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