Judge: Philadelphia Can Ban Use of Salary Histories in Setting Pay, But Not the Question Itself

Judge: Philadelphia Can Ban Use of Salary Histories in Setting Pay, But Not the Question Itself

A federal judge has partly struck down the ban on salary history inquiries passed by the city of Philadelphia last year, ruling that a prohibition against asking candidates about their past earnings infringes employers’ First Amendment right to free speech. However, US District Judge Mitchell S. Goldberg concluded in his ruling, issued Monday, that the city did have a right to bar employers from basing salary offers on that information as a means of combating wage discrimination:

I conclude that the City’s Inquiry Provision violates the First Amendment. Although the Ordinance represents a significant positive attempt to address the wage gap, the First Amendment compels me to enjoin implementation of the Inquiry Provision. The Reliance Provision, however, does not offend the First Amendment and remains intact.

Accordingly, Joseph DiStefano reported at the Philadelphia Inquirer, both the Chamber of Commerce for Greater Philadelphia, which pursued the lawsuit, and the city found something to celebrate in Monday’s ruling. DiStefano gets a local attorney’s take on what it means for employers:

Under Goldberg’s ruling, “employers have to be careful. You can ask for their prior salary. But, once you know the salary, it’s very difficult to ‘unring that bell,’” and claim there was no discrimination, if employees later find they were underpaid relative to others in the same job, [Tracey Diamond, an employment lawyer at Pepper Hamilton LLP,] added.

“The court upheld the part of the city ordinance that prohibits employers from relying on an applicant’s salary history on setting salaries. Thus, employers may ask the question, but cannot rely on the answer,” she said. So, employers who persist in asking applicants’ previous pay “will be in a difficult position of having to prove that any salary disparities [after they are hired] were not the result of the employer basing salary on prior salary history. This is similar to where the law stands for private employers in New Jersey.”

The Chamber of Commerce filed its lawsuit shortly after Philadelphia’s salary history ordinance was signed last January, and the city delayed enforcement of the ban while the suit worked its way through court. Goldberg is the first judge to rule on the constitutionality of these bans, which are meant to help close gender pay gaps by ensuring that gender-based pay disparities early in employees’ careers are not replicated with each successive job and salary offer. Diamond told DiStefano that she expected other lawsuits to follow in other jurisdictions.

Federal circuit courts have split on the broader question of whether using salary histories in pay determinations is inherently discriminatory: The Ninth Circuit recently issued a landmark ruling that differences in past salaries are insufficient to justify gender-based pay disparities. The 10th and 11th Circuits have concurred, while the Seventh and Eighth Circuits have issued contrasting opinions. This split among the circuit courts means that the Supreme Court is likely to take up this issue in the near future.

Salary history inquiries have been banned in a few other cities, most notably New York, and at the state or territory level in California, Delaware, Massachusetts, Oregon, and Puerto Rico. Other states have resisted the trend: Illinois Governor Bruce Rauner vetoed a ban last year, while Michigan’s state legislature has preempted local jurisdictions from enacting bans of their own.

Although most employers still use salary histories in setting pay, the trend among larger employers is unmistakably toward abandoning this practice in favor of less controversial, more transparent, and more rational methods of determining salaries. This trend reflects not only regulatory changes in major talent markets, but also growing demand for pay transparency among a workforce armed with more information about what their colleagues earn and what their work is worth