This month, Philadelphia became the first city in the nation to ban employers from asking job applicants about their salary history. The new ordinance, which was unanimously passed by the Philadelphia City Council, makes it illegal for employers to ask about a job applicant's wage history at any stage of the hiring process. It prohibits employers from relying on wage history information to determine the prospective employee's wages, including during the negotiation or drafting of an employment contract, and makes it unlawful for employers to retaliate against applicants who decline to provide wage history information. "Wages" are defined as "all earnings of an employee," and include fringe benefits, wage supplements, and other forms of compensation. Job applicants remain free to voluntarily disclose this information.
Violations of the law will be overseen by the Philadelphia Human Relations Commission. The Commission may issue injunctions and require employers to pay damages for proven violations, including compensatory damages, attorney's fees, and punitive damages in the amount of up to $2,000 per violation. Complainants will also have the right to file a private action in court.
Bans on salary history inquiries are a growing trend and employers should take note. This summer, Massachusetts became the first state to pass such a ban, with the Massachusetts Pay Equity Act scheduled to take effect in 2018. The New York City Council and New Jersey and Pennsylvania state legislatures are considering similar measures, and Mayor Bill de Blasio of New York City recently signed an executive order banning such questions on applications for jobs with city agencies. Employers who do not operate in these jurisdictions are nevertheless subject to the federal Equal Pay Act, which requires that men and women be given equal pay for equal work in the same establishment, as well as federal, state and local antidiscrimination laws.
Salary history bans seek to narrow the wage gap for women and minorities. Proponents believe that wage history questions perpetuate pay discrimination, since women are paid on average lower wages than men. They argue that removing wage history information from the hiring process levels the playing field by ensuring employees are paid for what the job is actually worth, not based on their prior earnings.
Given the enhanced focus on equal pay, employers should take steps to avoid liability and reduce unwarranted pay disparities. We recommend that employers regularly audit their compensation practices to ensure pay equity across gender, race and other protected classes. Employers should make sure that starting wages and promotions are determined based upon legitimate business reasons, and be prepared to justify pay differentials.