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Job interviews are tough and they can be full of awkward questions. One of the awkward questions many applicants face is a potential employer’s request for an applicant’s compensation history. Not only is that question awkward, but some have theorized that basing starting compensation on an applicant’s historical compensation perpetuates the gender and minority wage gap. As a result, a percentage increase of the current salary of an applicant who is impacted by the wage gap could result in an even wider wage gap when compared to an applicant who is not negatively impacted by the wage gap. Accordingly, there has been a recent trend in several cities and states to propose and even pass legislation banning a new employer from seeking salary history information from an applicant or basing a starting salary on an applicant’s prior salary.
In 2016, Massachusetts became the first state to pass a law prohibiting employers from asking potential candidates about their salary histories prior to making a job offer. Massachusetts Gov. Charlie Baker signed “The Act to Establish Pay Equity” on Aug. 1, 2016, with an effective date of July 1, 2018. Under this law, among other things, it is unlawful for an employer to “seek the wage or salary history of a prospective employee from the prospective employee or a current or former employer or to require that a prospective employee’s prior wage or salary history meet certain criteria,” Section 105A(c)(2). Salary history bills have also been introduced in other states such as California, New Jersey and Washington.
Cities are also getting in on the action, passing ordinances prohibiting the salary history question. On May 4, Mayor Bill De Blasio of New York City signed a bill into law prohibiting employers from asking applicants about their salary histories or relying on the salary history of an applicant to determine the salary that it will offer to an applicant. The New York City law is effective on Oct. 31.
Finally, two bills have been introduced in the U.S. House of Representatives that would impact an employer’s ability to request an applicant’s salary history if signed into law. See Fair Salary History Alternatives of Responsible Employment Act of 2016 (H.R. 6293; sponsored by Rep. Bonnie Watson Coleman, D-New Jersey) and the Pay Equity for All Act of 2016 (H.R. 6030; sponsored by Rep. Eleanor Norton, D-District of Columbia). Both of those bills are currently in House committees.
In Philadelphia, an ordinance was passed that amended the city’s “Fair Practices Ordinance: Protections Against Unlawful Discrimination” ordinance (the ordinance amendment). Citing the U.S. Census Bureau 2015 report, the ordinance amendment claims that in Pennsylvania, women are paid 79 cents for every dollar a man makes, Phila. Code Section 9-1131(1)(a). It also claims that women of color are paid even less—African-American women are paid only 68 cents to the dollar, Latina women are paid 56 cents to the dollar and Asian women are paid 81 cents to the dollar.
The ordinance amendment made it an unlawful employment practice for “an employer, employment agency, or employee or agent thereof” to “inquire about a prospective employee’s wage history, require disclosure of wage history, or condition employment or consideration for an interview or employment on disclosure of wage history, or retaliate against a prospective employee for failing to comply with any wage history inquiry.” Further, the ordinance amendment made it unlawful to rely on the wage history of a prospective employee from any current or former employer in determining wages for a prospective candidate. Violation of the ordinance amendment subjects employers to civil and criminal penalties, including up to $2,000 per violation (Phila. Code Section 9-1105(d)), as well as an additional $2,000 and 90 days in jail for repeat offenses (Phila. Code Section 9-1121).
While the ordinance amendment was pending before the Philadelphia City Council, the Chamber of Commerce for Greater Philadelphia (the Chamber) provided testimony opposing the bill. While recognizing a concern for wage equality, the Chamber raised concerns that a prohibition on wage history inquiries will negatively impact employers that use salary history to evaluate potential candidates.
Ultimately, the opposition was to no avail, as the Philadelphia City Council passed the ordinance amendment in a 16-0 vote. Mayor James Kenney signed the ordinance amendment into law on Jan. 23; it would have taken effect on May 23, and would have been the first law in effect to prohibit inquiry into an applicant’s salary history (Massachusetts’ law is not effective until July 1, 2018, and New York City’s ordinance is not effective until Oct. 31 of this year).
Prior to taking effect, however, the Chamber filed a lawsuit in the U.S. District Court for the Eastern District of Pennsylvania requesting declaratory and injunctive relief, see The Chamber of Commerce for Greater Philadelphia v. City of Philadelphia, 17-cv-01548 (E.D. Pa. April 6). In the lawsuit, the Chamber argued that the amendment would have disadvantaged Philadelphia businesses. Specifically, the Chamber alleges that wage history is “important to the hiring process because employers use it, among other things, to identify job applicants they cannot afford, to set a competitive, market-based salary for their positions, and to assist in evaluating applicants’ prior job responsibilities and achievements.”
The legal bases for the Chamber’s request were three-fold. First, the Chamber argued that the ordinance amendment violates the First Amendment free speech rights of employers and is insufficiently tailored to reducing gender-based wage disparities. Second, the Chamber argued that the ordinance amendment violates the due process clause of the 14th Amendment based on the severe penalties for violating the ordinance amendment. Third, the Chamber argued that the ordinance amendment’s definition of the word “employer” is overbroad and therefore invalid because it applies to even to those employers who are located outside of Philadelphia. Specifically, it defines employers as “any person who does business in the city of Philadelphia through employees or who employs one or more employees.” Thus, the Chamber requested that the district court enter a judgment declaring the ordinance amendment as void and of no force.
In response to the complaint and motion for preliminary injunction, the city of Philadelphia has raised the issue of whether the Chamber has standing to prosecute its lawsuit and briefing on this issue is currently underway. On May 30, Judge Mitchell S. Goldberg granted the city’s motion and dismissed the complaint on the grounds that the Chamber had not shown that at least one of its members would have standing to bring the suit. Judge Goldberg did, however, grant the Chamber leave to amend its complaint on or before June 13, 2017.
Meanwhile, efforts by the Pennsylvania legislature to pre-empt the Philadelphia ordinance are underway. Sen. Thomas J. McGarrigle, a Republican serving part of Chester and Delaware counties, is the prime sponsor of SB 241, which seeks, among other things, to amend Pennsylvania’s Equal Pay Law so that ordinances, such as the one passed in Philadelphia, are pre-empted by the Equal Pay Law. SB 241 is currently making its way through the Pennsylvania House of Representatives.
While there are few answers for employers and employees regarding wage history inquiries, what is certain is that the law in this area is developing quickly. The clear trend by local and state governments is to attempt to close the wage gap through the prohibition of salary history inquiries. Thus, this may be a good time for employers to revisit their practices and procedures with respect to salary history inquiries and to keep updated on this rapidly changing legal landscape.
*Reprinted with permission from the 6/1/17 issue of The Legal Intelligencer. © 2017 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.