Employers in Philadelphia will soon no longer be able to ask prospective candidates for their prior salary history, or rely on prior salary histories to determine offers of compensation.
Here's what you need to know:
- The law forbids employers from asking about prior history or considering a worker’s past wages and compensation in determining an offer of compensation
- The law does not apply in situations where an employer is acting under the authority of a local, state, or federal law that specifically authorizes the disclosure or verification of wage history for employment
- The ordinance was signed into law by the mayor in January 2017, but enforcement was stayed after the Greater Philadelphia Chamber of Commerce sued the city
- On February 6, the U.S. Court of Appeals for the Third Circuit overturned the lower court ruling
Philadelphia will soon be joining the rapidly growing number of cities and states that forbid employers from asking or relying on prior salary history to set wages for prospective employees.
On February 6, 2020, The U.S. Court of Appeals for the Third Circuit reversed a district court’s preliminary injunction, which prohibited the city from enforcing the salary ban.
“This is a significant victory not just for Philadelphia, but also for the national equal pay movement,” City Solicitor Marcel S. Pratt, who argued the case before the appeals court, said in a statement.
“With this ruling, the Third Circuit agreed that the city made a well-reasoned judgment based on a ‘plethora of evidence’ that banning wage history inquiries would prevent the further perpetuation of gender and race discrimination in wages.”
The Philadelphia law, like the New Jersey and New York salary history bans, is fairly stringent as it goes even further than forbidding employers from asking about a worker’s past wages. It forbids employers from considering a worker’s past wages and compensation in determining an offer of compensation.
[The law] forbids employers from considering a worker’s past wages and compensation in determining an offer of compensation.
The enforcement date for the law, known as the Wage Equity Ordinance, has not yet been set. It was set for 2017, but that was delayed because of a legal filing from the business community opposing the measure.
Closing the wage gap
The municipal law aims to close the wage gap for women and people of color. Relying on a 2015 U.S. Census Bureau report, city legislators noted in the measure that in Pennsylvania women are paid 79 cents for every dollar a man makes and that women of color are paid even less.
A study by the American Association of University Women found that, even taking into account factors that affect earnings, women’s lowered earnings in comparison to men begins as early as one year after college — where women typically earn 6.6% less than men.
The Philadelphia lawmakers also observed that the gender wage gap has narrowed by less than one-half a penny a year in the U.S. since the passage of the Equal Pay Act in 1963.
The legislators declared that “salary offers should be based upon the job responsibilities of the position sought and not based upon the prior wages earned by the applicant.”
… city legislators noted in the measure that in Pennsylvania women are paid 79 cents for every dollar a man makes and that women of color are paid even less
Proponents of salary history bans say women and people of color are paid less than men with their first job and that the salary history gap is perpetuated throughout their careers as most employers base employee compensation on the wages and remuneration received in previous jobs, leaving women and minorities at a longstanding pay deficit.
Opponents of such laws, however, say that salary history inquiries help them to weed out applicants for whom the job, based on pay, wouldn’t be a good fit. They also say employers who like to keep costs down may see a significant increase in hiring costs if they have to match the pay of others.
Salary history ban details
The Philadelphia salary history ban applies to employers, employment agencies, and their agents. Employers include businesses or individuals with at least one employee that does business in the city as well as public agencies.
Covered employers cannot:
- Ask, including in writing, about a prospective employee’s wage history
- Require disclosure of wages or wage history
- Make it a condition of employment or consideration for an interview that job applicants disclose their wage history
Wages are defined broadly and refer to all earnings (including commission), fringe benefits, bonuses, etc.
In addition to not being allowed to ask about prior wages, covered employers are not allowed to rely on the wage history of a prospective employee at any place in the employment process. This includes when negotiating or drafting an employment contract, unless the applicant has “knowingly and willingly” disclosed their wage history to the future employer.
Some salary history bans allow an inquiry into previous salary history after a job offer that includes compensation has been extended or after a job offer has been accepted.
Covered employers are not allowed to retaliate against a prospective employee for failing to comply with a wage history inquiry or for otherwise opposing any action that is illegal under the wage equity law.
So, in general, the law makes it illegal for employers to ask about or rely on previous wage history in setting wages for prospective employees. However, legal experts agree that employers are allowed to ask job applicants about their salary expectations or salary requirements.
The law does not apply in situations where an employer is acting under the authority of a local, state, or federal law that specifically authorizes the disclosure or verification of wage history for employment.
Litigation delayed enforcement
The ordinance was signed into law by the mayor in January 2017, but enforcement was stayed after the Greater Philadelphia Chamber of Commerce sued the city, claiming that the ordinance violated the First Amendment free speech rights of employers. A federal district court judge agreed and granted a preliminary injunction temporarily blocking the part of the law that banned pay history inquiries.
However, on February 6, the U.S. Court of Appeals for the Third Circuit overturned the lower court ruling, deciding in favor of the city on February 6 and upholding the constitutionality of the measure under the First Amendment.
Cities and states move forward with salary history bans
Massachusetts was reportedly the first state to enact a law forbidding employers from seeking or requiring that would-be employees provide their wage history in 2016. Since then, the movement has mushroomed with about 18 statewide bans and 21 bans in place in local jurisdictions, according to HR Dive.
Details of the bans vary. Some only apply to government employers, and some of the local bans become void if a statewide ban is approved. There are some bans that allow employer salary history inquiries after an offer has been made that includes compensation.
Most of the bans only apply to job applicants, although a few apply to both prospective and current employees. Several of the bans forbid employers from asking about previous salary history. Others go further and forbid employers from asking about, and relying on, previous salary history unless the information has been volunteered.
But there’s been a backlash. In employer-friendly moves, Michigan and Wisconsin lawmakers in 2018 approved laws that “banned the bans,” basically forbidding local governments from regulating the information that employers can require, request, or exclude on job applications or during the hiring process.
On the national front, there is no salary history ban in effect — although the U.S. House of Representatives approved a bill on March 27, 2019 called “The Paycheck Fairness Act” that would, among other things, ban employers from inquiring about a job candidate’s salary history.
A companion bill in the U.S. Senate was introduced in January 2019 but there’s been little movement on it since its introduction.