Challenge to Philadelphia Pay History Ordinance Dismissed, But Ordinance’s Future Remains In Doubt

By David J. Woolf

Last week, District Court Judge Mitchell Goldberg granted the City of Philadelphia’s Motion to Dismiss the Philadelphia Chamber of Commerce’s lawsuit challenging Philadelphia’s controversial new pay history ordinance. As we have discussed previously (see Here’s What that New Philadelphia ‘Pay History’ Law Means for Your Business and Philadelphia Wage Equity Ordinance On Hold … For Now), the ordinance would make it unlawful for an employer to inquire about a job applicant’s pay history and would severely restrict an employer’s ability to base a new hire’s initial pay on his or her compensation history. The ordinance had been scheduled to go into effect on May 23, but was stayed by Judge Goldberg, with agreement of the City, pending resolution of the City’s motion to dismiss the Chamber’s lawsuit challenging the ordinance.

Judge Goldberg’s decision is likely not the last word however, as it did not address the merits of the ordinance. Rather, the Court held that the Chamber, because of the way the lawsuit was worded, did not have standing to challenge the ordinance, and it gave the Chamber until June 13, 2017 to file an amended complaint to cure those deficiencies. The Chamber is now expected to do just that.

In the meantime, the question is whether and, if so when, Philadelphia employers need to start complying with the ordinance. Despite the fact that Judge Goldberg’s decision, in dismissing the Chamber’s lawsuit, arguably lifted the stay, the City announced the following position through a spokesperson:

If the chamber files an amended complaint that cures the standing defects identified by the court, the city will adhere to its agreement not to enforce the order until the chamber’s motion for preliminary injunction is resolved. If no amended complaint is filed within the period stipulated by the court, the city will begin taking steps to enforce the ordinance….

Given this statement, we believe that the best approach is for Philadelphia employers to continue to prepare to comply with the ordinance, but to hold off on implementation until we see what the Chamber does between now and June 13. If, as expected, the Chamber files an amended complaint, we will be back to playing the waiting game for a little while longer.

We will continue to provide updates as developments occur.

Recruiting and “Off-Limits” Questions about Salary History – What Employers Need to Know

By Lynne Anderson

By October of 2017, NYC employers – and their recruiting agencies – will no longer be allowed to ask about an applicant’s salary and benefits history during the interview process due to a recent amendment to the NYC Human Rights Law. This law follows Executive Orders signed in November 2016 by Mayor de Blasio, and in January 2017 by Governor Cuomo, banning questions about salary history for NYC and NY state public-sector applicants prior to a conditional offer of employment. In addition, private employers in Philadelphia as of May 2017, and Massachusetts as of July 1, 2018, will also be banned from asking applicants about their compensation history. These laws are intended to help break the perpetuation of salary inequities by prohibiting reliance on prior, possibly inequitable compensation levels, as a means to set salaries and other compensation for incoming employees. Public Advocate Letitia James co-sponsored the NYC bill after a study conducted by her office found that women in New York earn $5.8 billion less in wages than men every year, or 87 cents for every dollar that men make, and the wage discrepancies were worse for minority females.

What does the NYC law prohibit?

It will be a discriminatory employment practice to do the following.

(1) Ask an applicant, or their current/prior employer – either in writing or during the interview process – about the applicant’s wage, benefits or other compensation history. This prohibition extends to inquiries made by search firms on behalf of the prospective employer. However, applicants can be asked about their historic productivity metrics, such as their level of revenue or sales at their current or prior employers.

(2) Conduct internet or other searches of public records in an effort to determine the candidate’s salary history. Employers are still permitted to conduct background checks of applicants, but if the background check discloses an applicant’s salary history, the employer may not rely on such disclosure for purposes of determining an applicant’s compensation.

(3) Rely on the compensation history of an applicant in determining what to offer the applicant with regards to salary, benefits or other compensation, unless the applicant “unprompted” and “willingly” discloses that information. However, this exception is not necessarily that helpful as employers can expect that the issue of whether a disclosure was truly “willing and unprompted” to be the subject of much debate.

What are the penalties for violations?

The NYC Commission on Human Rights will enforce the prohibition, and may impose a civil penalty of up to $125 for an intentional violation, and up to $250,000 for an “intentional malicious violation.” Plaintiffs’ employment lawyers will also file private cause of actions, and will likely seek discovery related to recruiting practices in an effort to ferret out potential violations they will cite to as evidence in support of disparate impact sex discrimination claims.

What should employers do now?

Employers are watching to see if these laws will be challenged before implementation. For example, Philadelphia’s law is currently being challenged in a federal lawsuit filed in early April by The Chamber of Commerce for Greater Philadelphia seeking to block implementation of the law on ground of violation of First Amendment rights. The NYC law is also expected to face a challenge from industry groups, although the Bronx Chamber of Commerce has publicly supported the new law.

Until a challenge is successful, employers should consider the following action items with regards to the NYC law:

  • Remove salary history questions from job applications, including online applications.
  • Provide notice, in writing, to recruiting agencies and background check companies, to exclude salary history inquiries as part of their process, and direct them not to provide salary history information to your company as the potential employer. You can also work this into contract renewals and any Statement of Work or recruiting search request, along with an indemnification obligation if a lawsuit ensues due to an agency’s failure to comply.
  • Train HR, internal recruiters and other employees who interface with job applicants not to ask about salary/benefits/compensation history, but to explore other permissible areas. For example, the NYC law allows employers to discuss an applicant’s compensation expectations, including with regards to unvested equity or deferred compensation that an applicant would forfeit if they left their current employer to accept a new job offer. Interviewers are also still able to ask questions to probe the candidate’s level of experience and proficiency such as performance results, management experience, etc.
  • Train these same individuals about the need to document, in writing, when a candidate makes an unprompted disclosure of his/her salary history.
  • Consider posting salaries, or salary ranges, for open jobs. The new NYC law does not require this, but the bill suggests to businesses that they post salaries for jobs instead of relying on salary history to set compensation.
  • Don’t ignore ongoing obligations to audit to protect against potential pay inequities. As we have been discussing, all private employers with 100 or more employees will likely have to report pay data broken down by gender and race as part of the new federal EEO-1 reports due in March 2018 for 2017 data, and California employers must comply with record keeping requirements imposed by California’s Fair Pay Law in effect since 2016. California’s Fair Pay Law was also amended, effective January 1, 2017, to provide that prior salary will not, by itself, justify a disparity between the salaries of similarly situated employees.

Also, keep in mind that while removing prior salary history from the hiring process may help limit perpetuation of wage gaps, the practical reality is that a candidate’s ability to negotiate a higher salary will likely still drive salary differentials. Employers will need to protect against unintended pay inequities resulting from the recruiting process.

Here’s What that New Philadelphia ‘Pay History’ Law Means for Your Business

David Woolf wrote an article for the Philadelphia Business Journal titled, “Here’s what that new Philadelphia ‘pay history’ law means for your business.” Philadelphia will likely become the first city in the nation to ban employers and employment agencies from asking job applicants for their salary history or requiring disclosure of such information. The Philadelphia City Council unanimously approved the bill on December 8; if enacted as expected, the new law will go into effect 120 days after the Mayor signs it. David discusses what this new bill means for local businesses.

Dave notes that the ordinance would also make it unlawful for an employer to base their compensation offer on an applicant’s prior salary unless the applicant knowingly and willingly discloses their salary history to the employer. The new law is meant to lessen the wage gap earnings between white males and women and minorities, but has been met with some controversy. The Philadelphia Chamber of Commerce has openly opposed the bill, stating that the legislation “goes too far in dictating how employers can interact with potential hires.”

Though Philadelphia has previously enacted legislation prohibiting or limiting certain questions that it considers “out of bounds,” this restriction is arguably different in that employers regularly use salary information in the hiring process. Dave highlights that while the inquiries may have unintended consequences, they can also add value, such as gauging an applicant’s assertions regarding their level of authority and responsibility in their current position, their advancement history and potential for future advancement, and a general sense of the applicant’s market value.

Dave advises employers to notify and train those involved in the hiring process of the anticipated ordinance, update their job application materials as needed and develop additional tools to still to get at the information needed. He also advises employers to look as the issue of pay equity more broadly.

Read “Here’s what that new Philadelphia ‘pay history’ law means for your business.”

A Bill Prohibiting Questions About Past Compensation Introduced In Congress

By Kate S. Gold and Philippe A. Lebel

On September 14, 2016, Representative Eleanor Holmes Norton (D – D.C. At Large) introduced the Pay Equity for All Act of 2016 (the “PEAA”) in the U.S. House of Representatives.   In relevant part, the PEAA would amend the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. §§ 201 et seq., to prohibit employers from asking prospective employees about their previous wages or salary histories, including benefits or other compensation.  In addition to prohibiting these pre-hire inquiries, the PEAA prohibits employers from seeking out the information on their own.  The PEAA prohibits employers from retaliating against any employee or applicant because the employee opposed any practice unlawful under the law or for testifying or participating in any investigation or proceeding relating to any act or practice made unlawful by the PEAA.  Any “person” who violates the PEAA is subject to a civil penalty of $5,000 for the first “offense,” which increases by $1,000 for each subsequent offense, up to $10,000.  In addition, any person violating the PEAA is liable to each employee or prospective employee who is subject to a violation for special damages not to exceed $10,000 plus attorneys’ fees, as well as potential injunctive relief.

In her introductory remarks, Representative Norton explained that the purpose of the PEAA was to “help eliminate the gender and racial pay gap” and to “ensure that applicants’ salaries are based on their skills and merit, not on a potentially problematic salary history.” The bill initially was co-sponsored by Representatives Rosa DeLauro (D – CT), Jerrold Nadler (D – NY), and Jackie Speier (D – CA); subsequent co-sponsors include Representatives Gwen Moore (D – WI), John Conyers, Jr. (D – MI), Barbara Lee (D – CA), and Frederica S. Wilson (D – FL).  The PEAA was immediately referred to the House Committee on Education and the Workforce.

The PEAA follows the enactment of a similar piece of legislation by Massachusetts in August of this year. That new law, An Act to Establish Pay Equity, takes effect on July 1, 2018.

If passed, the PEAA could dramatically impact employers’ ability to gauge “market rate” pay for new employees. At the same time, setting pay prospectively based on employers’ objective beliefs about the positions in question, without the benefit of employees’ past pay histories, may reduce potential pay inequity in subsequent audits down the road.

Although the PEAA is in its early stages, and there is no guarantee that it will ultimately pass, employers should continue to monitor this important piece of legislation. The text of the current language of the bill can be accessed by the following link.

Massachusetts Joins California and New York with Aggressive Equal Pay Law

By Lynne A. Anderson

On August 1, Massachusetts added significant teeth to the state’s current equal pay law. The new law, “An Act to Establish Pay Equity,” not only targets compensation decisions, it also affects hiring practices.   As of July 1, 2018, when the new law takes effect, employers cannot ask an applicant to provide his or her prior salary history until after the candidate has successfully negotiated a job offer and compensation package.  This measure is intended to stop the perpetuation of gender pay disparities from one employer to the next.  In addition, employers cannot use an employee’s prior salary history as a legitimate basis to pay a man more than a woman for comparable work.

The definition of comparable work is broad: “work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions: provided, however, that a job title or job description alone shall not determine comparability.”

Under the new law, employees can openly discuss their wages without fear of retaliation. As a result, non-disclosure provisions in handbooks and employment agreements will need to be modified.

Also, while the law recognizes seniority is a legitimate reason for a pay disparity, it prohibits the employer from reducing credit for seniority based on time off due to a pregnancy-related condition or protected parental, family and medical leave. Therefore, policies that take leaves of absence into account when determining pay will need to be adjusted.  As in California’s Fair Pay Act, an employer cannot reduce the wages of other Massachusetts employees to rectify any wage disparities.  Also, having an employee contract away any rights under the new law will not be a valid defense to an equal pay claim.

The new law also lowers barriers to litigation.   The statute of limitations to file an equal pay claim under the new law is extended to three years from the one year limitations period under the current statute.  Also, employees can now sue employers in court without having to first file a claim with the Massachusetts Commission Against Discrimination – which is required under the existing statute.

The law does encourage employers to self-audit in order to address pay disparities; the new law provides an affirmative defense to an employer that has completed a self-evaluation of its pay practices and can demonstrate that reasonable progress has been made towards eliminating wage differentials within the three years prior to the commencement of any lawsuit. In addition, claimants are barred from using evidence of a recent audit and remedial steps to prove their equal pay claims.

As far as next steps for the state, the Massachusetts Attorney General will issue regulations interpreting and applying the new law. The law also provides that a special commission will investigate, analyze and study causes of gender-based pay disparity as well as other protected characteristics, including race, color, religious creed, national origin, gender identity, sexual orientation, genetic information, ancestry, disability and military status. This commission must submit its initial findings to the Massachusetts legislature by January 1, 2019.

For more information on compliance with Title VII, the Equal Pay Act and various state laws regarding gender discrimination and fair pay, contact Kate Gold or Lynne Anderson.

Just Don’t Ask: With The Fair Chance Ordinance, San Francisco Joins A Growing Number Of Jurisdictions That Restrict Employers’ Pre-Hire Inquiries About Applicants’ Criminal Histories

By Cheryl D. Orr and Philippe A. Lebel

In February 2014, San Francisco joined the growing number of jurisdictions that have enacted so-called “ban the box” laws.  Like many of its counterparts, San Francisco’s Fair Chance Ordinance, which will become effective in August 2014, significantly limits employers’ abilities to inquire about and/or consider applicants’ and employees’ criminal records when making employment decisions.

Pursuant to the Ordinance, San Francisco employers are prohibited from asking about applicants’ criminal histories until either (a) after the applicants’ first live interview, or (b) after a conditional offer of employment has been extended.  However, the Ordinance places considerable limits on obtaining and using any information obtained.  Specifically, employers are prohibited from inquiring about or taking any adverse action against applicants or current employees based on:  (a) any arrests not leading to a conviction, except for some unresolved (i.e., pending) arrests; (b) participation in or completion of a diversion or deferral of judgment program; (c) convictions that have been judicially dismissed, expunged, voided, invalidated or otherwise rendered inoperative; (d) convictions or other determinations of the juvenile justice system; (e) convictions older than seven years; and/or (f) information pertaining to any offense other than a felony or misdemeanor (e.g., infractions).  Before making any inquiry about an applicant’s conviction history, the Ordinance requires that the employer provide the applicant in question with a notice promulgated by the San Francisco Office of Labor Standards Enforcement (“OLSE”).

The Ordinance also requires that employers engage in an individualized assessment and consider only directly-related convictions when making decisions about applicants.  Employers also must consider the amount of time that has elapsed since the applicants’ convictions and any evidence of rehabilitation, inaccuracy of the applicants’ records, and/or other mitigating factors.  Before making any adverse decision, employers are required to provide the employee with a written notice of their intention to make such a decision, detailing the reasons for the decision.  In addition, if any background report was considered by the employer, the employer must also provide that to the applicant.  Any affected candidate has seven days following receipt of the employer’s notice to submit evidence regarding:  (i) the inaccuracy of the criminal history information; or (ii) rehabilitation or mitigating factors.  If the employer receives such information from an applicant, it must delay its intended action and consider the additional information.

In addition to the above restrictions, the Ordinance contains strict anti-retaliation/interference provisions.  The Ordinance also requires that employers post a notice of applicants’ and employees’ rights in a conspicuous place at every workplace, job site, or other location in San Francisco that is under the employer’s control and that is frequently visited by employees or applicants.  In addition, any job postings must contain a notice that the employer will comply with the Ordinance’s requirements.

Though San Francisco’s ordinance is particularly stringent, the City is by no means alone in banning employers from inquiries about applicants’ criminal pasts:  dozens of cities and several other states – including Hawaii, Massachusetts, Minnesota, and Rhode Island – have enacted similar “ban the box” legislation.  Moreover, there are a growing number of organizations pushing for the enactment of similar laws and ordinances across the country.

Employers in jurisdictions that have already enacted “ban the box” laws should ensure that they avoid any impermissible inquiries.  Employers in locations that have not yet been affected should closely monitor developments in their jurisdictions to avoid any exposure.