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By: Courtney Mazzio
Back in 2017, Philadelphia was among the early adapters of the salary history ban that we see starting to trend nationwide. However, prior to the enactment of the Philadelphia wage equity ordinance, the Chamber of Commerce for Greater Philadelphia initiated an action against the City of Philadelphia, challenging the constitutionality of the salary history ban law, arguing the portion of the law that prevents employers from inquiring about an applicant’s wage history violated an employer’s free speech rights. The Eastern District of Pennsylvania did block that inquiry rule, finding that the law as written violated the First Amendment free speech rights of Philadelphia employers. However, the court upheld the reliance provision of the law, which makes it illegal to rely upon wage history to set the employee’s compensation.
On February 6, 2020, the Third Circuit Court of Appeals overturned the decision on the inquiry rule, and the wage equity ordinance will now prohibit Philadelphia employers from doing the following: (1) inquiring about a prospective employee’s wage history; (2) requiring disclosure of wage history; (3) conditioning employment or consideration for an interview on disclosure of wage history; (4) retaliating against a prospective employee for failing to comply with any wage history inquiry; and (5) relying on the wage history of a prospective employee in determining their wages unless they “knowingly and willingly” disclosed their wage history to the employer.
The court reasoned that though new law does act to limit employers’ speech, it is “only because that limitation prevents the tentacles of any past wage discrimination from attaching to an employee’s subsequent salary.” Therefore, the court concluded that the goal of pay equity outweighed any limitations on free speech rights now placed on employers. Although this suit is not yet over and future legal challenges could ensue, we may start to see enforcement of this new law, so it is important for employers to think about revising their hiring practices to insure that potential employee interviews and applications do not impermissibly inquire into, or rely upon, prior compensation information. Moreover, employers should continue to remember that they may only use compensation information if the potential employee knowingly and willingly discloses the information, meaning, if the employer comes across the pay history information by another means, the employer cannot use the pay history information to inform its compensation decisions with regards to the potential employee.
If you have any questions, or would like more information, please contact Courtney Mazzio at [email protected].