Third Circuit Upholds Philadelphia Ban on Salary History Inquiries

In early February 2020, the Third Circuit Court of Appeals decided that a Philadelphia ordinance passed years ago could go into effect and that Philadelphia employers will no longer be able to ask job applicants about their salary history in job interviews and related contexts.

The Decision

The decision, Greater Philadelphia Chamber of Commerce v. City of Philadelphia, reinstated a Philadelphia ordinance that had been struck down in part by a federal district court on the ground that it violated the employer’s right to free speech under the First Amendment.

The law, which was discussed in prior articles (see Challenge to Philadelphia Pay History Ordinance Dismissed, But Ordinance’s Future Remains In Doubt, Here’s What that New Philadelphia ‘Pay History’ Law Means for Your Business and Philadelphia Wage Equity Ordinance On Hold … For Now), prohibits an employer from asking about a prospective employee’s wage history and from relying on wage history at any point in the setting or negotiating of a prospective employee’s wage. It was passed to address pay disparities impacting women and minorities.

In striking down the law, the federal district court found that Philadelphia had not produced sufficient evidence to show that the ordinance would mitigate the racial- and gender-based pay gap, writing “while the conclusion that a discriminatory wage gap could be affected by prohibiting wage history inquiries was characterized by respected professionals as a logical, common sense outcome, more is needed.”

The Third Circuit disagreed. It found that there was “a plethora of evidence” that wage discrimination was a substantial and continuing problem, and “based on that substantial evidence, the City Council made a reasonable judgment that a wage history ban would further the City’s goal of closing the gap and ameliorating the discrimination inherent in the disparate wages.”

Following this decision, Philadelphia joined a growing number of states and localities that have enacted similar bans, such as California, New York and New Jersey.

What It Means for Employers

After the Third Circuit’s ruling, the City of Philadelphia is now free to enforce the ordinance, and Philadelphia employers should begin complying with the ordinance immediately. We recommend that Philadelphia employers take the following steps:

  • Work with your human resources department and hiring managers to review all employment applications to ensure that they do not contain questions about a prospective employee’s salary history.
  • Incorporate the prohibition on salary history inquiries into the training of all employees involved in the hiring and interviewing processes and make sure that these employees refrain from asking applicants about their salary history.
  • Make sure your formula for setting salaries and your strategies for negotiating salaries are in no way based on salary history information. In its decision, the Third Circuit suggested that employers should instead rely on qualifications, work history, skills, and any other job-related questions relevant to performance or fit with the company.

The ordinance is effective immediately and applies to employers located in the City of Philadelphia and those located outside of Philadelphia that are considering applicants for positions located within the City.

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