On April 30, 2018, a federal district court issued a long-anticipated ruling on Philadelphia’s salary history ban. The ban, scheduled to take effect May 23, 2017, has two parts: (1) the “Inquiry Provision,” precluding employers from inquiring about a prospective hire’s wage history; and (2) the “Reliance Provision,” prohibiting employers from relying on the wage history of a new employee in determining the employee’s pay, unless the employee “knowingly and willingly disclosed his or her wage history to the employer.”
The Philadelphia Chamber of Commerce challenged the ban, one of the first of its kind in the country, on First Amendment grounds. The Chamber was supported by several large Philadelphia-area employers.
Judge Mitchell S. Goldberg of the Eastern District of Pennsylvania struck down the Inquiry Provision as unconstitutional, finding that an employer questioning a prospective employee’s wage history constitutes commercial speech. Because the Inquiry Provision attempted to restrict commercial speech, it needed to withstand intermediate scrutiny to pass constitutional muster. Judge Goldberg ruled that the Inquiry Provision failed to meet an element of intermediate scrutiny, namely, that the provision “will directly advance the substantial interest of reducing discriminatory wage disparities and promoting wage equity.” This was due in large part to the Judge’s opinion that the City failed to produce sufficient evidence of a connection between the Inquiry Provision and the discriminatory wage gap.
However, Judge Goldberg upheld the Reliance Provision, finding that it did not impact “speech” and therefore was not subject to a full analysis under the First Amendment. Thus, the Reliance Provision will take effect, prohibiting employers from relying on a prospective employee’s wage history to determine the employee’s pay unless the employee “knowingly and willingly” discloses the information.
The Judge’s ruling makes clear that employers are technically permitted to ask about an employee’s wage history. However, the information an employer learns about the prospective hire’s salary history cannot be relied upon unless it is “knowingly and willingly” provided. Of course, once an employer inquires about salary history, it cannot unlearn what the employee discloses, making it difficult not to rely upon that information.
At this point, the ban does not define what it means for an employee to “knowingly and willingly” disclose such information, a standard which will likely be the subject of future litigation. While questions remain about the knowing and willful standard, Philadelphia employers may be well served by following protocols similar to those adopted by employers in jurisdictions where salary history bans are in place or will soon take effect, such as California, Massachusetts, and New York City. Those protocols are outlined in the links below and including removing salary history questions from applications, as well as other parts of the recruiting and hiring process. Employers should also train employees involved in the recruiting and hiring process regarding the Reliance Provision of the ban.