On February 6, 2020, the Third Circuit Court of Appeals upheld Philadelphia's salary history ordinance and reversed the decision of the United States District Court for the Eastern District of Pennsylvania which had held that one of the ordinance's provisions was unconstitutional. Greater Philadelphia Chamber of Commerce v. City of Philadelphia.1
The Philadelphia Wage History Ordinance
In 2017, Philadelphia enacted salary history legislation aimed at shrinking the City's wage gap.2 In pertinent part, the ordinance prohibits Philadelphia employers from engaging in two categories of employment practices: (1) inquiring about a prospective employee's wage history; and (2) relying upon the wage history of a prospective employee in determining what salary or wages to offer that individual.3
Challenge by the Greater Philadelphia Chamber of Commerce
In April 2017, shortly after the ordinance was passed, the Greater Philadelphia Chamber of Commerce ("Chamber") filed a lawsuit in federal district court and moved for a preliminary injunction of the ordinance, arguing that the ordinance was unconstitutional because it violated the First Amendment free speech rights of employers. The district court granted in part and denied in part the Chamber's request for injunctive relief.4 In reaching its conclusion, the court reasoned that the "Inquiry Provision" of the ordinance—the section that prohibited employers from inquiring about prospective employees' wage history—violated the First Amendment speech rights of employers and invalidated that part of the ordinance.5 However, the court concluded that the "Reliance Provision" of the ordinance—the section that prohibited employers from relying upon prospective employee's wage history information—did not implicate or regulate speech, and upheld that section of the ordinance on that basis.6 Following the district court's decision, implementation of the ordinance was stayed.7
The Third Circuit's Decision
On appeal, the Third Circuit reversed the district court's decision with respect to the "Inquiry Provision."8 The Third Circuit concluded that the "Inquiry Provision" of the ordinance was constitutional because it met the intermediate scrutiny standard applicable to commercial speech under the U.S. Constitution.9 The court affirmed the lower court's decision with respect to the "Reliance Provision," likewise concluding that it regulated conduct, rather than speech.10
In reversing the district court's decision with respect to the "Inquiry Provision," the Third Circuit concluded that the district court applied too exacting a standard in assessing the ordinance.11 In the district court's view, the witness testimony offered in support of the ordinance was "riddled with conclusory statements, amounting to 'various tidbits' and 'educated guesses'" and was insufficient to support the City's stated aim in enacting the legislation.12
The Third Circuit disagreed and reviewed, in detail, the testimony provided by witnesses who testified before the City Council and an affidavit provided by the City in response to the lawsuit.13 The Third Circuit concluded that the district court's analysis applied "a much higher standard than required" by intermediate scrutiny.14 In its decision, the Third Circuit reiterated that the Supreme Court does not require a legislature to produce empirical proof that the proposed legislation would achieve its stated goal; instead, the inquiry rests on whether the legislature drew a "reasonable inference based on substantial evidence" that its interests will be furthered by the legislation as drafted.15 Based on the "substantial evidence in the form of testimony and metanalysis of relevant research" presented by the City, the Third Circuit concluded that the "City Council made a reasonable judgment that a wage history ban would further the City's goal of closing the [wage] gap and ameliorating the discrimination inherent in . . . disparate wages."16
What This Ruling Means for Philadelphia Employers
The Third Circuit's decision affirmed the district court's denial of the preliminary injunction as to the "Reliance Provision," vacated its decision with respect to the "Inquiry Provision," and remanded the case back to the district court with directions to deny the preliminary injunction as to the "Inquiry Provision."17 In effect, the City can resume implementation of the ordinance and prohibit employers from inquiring about, or relying upon, prospective employees' wage history information.18
Philadelphia employers should strive to comply with the provisions of the ordinance and avoid asking prospective employees about their wage history information. Importantly, the ordinance defines "inquire" to include inquiries made to a job applicant "in writing or otherwise."19 Accordingly, in addition to training hiring managers and recruiters to avoid asking job applicants about their wage histories during interviews or other pre-employment screenings, employers should also review and revise job applications and related documentation provided to prospective employees to ensure there are no references to applicants' wage history. Likewise, employers should not rely on the wage history of prospective employees in determining wages for them, unless the prospective employees voluntarily disclose their wage history information.
1 No. 18-2175 (Feb. 6, 2020).
2 See Phila., Pa., Code § 9-1131.
4 319 F. Supp. 3d 773 (E.D. Pa. 2018).
5 Chamber of Commerce for Greater Phila. v. City of Phila., 319 F. Supp. 3d 773, 783 (E.D. Pa. 2018), aff'd in part, vacated in part, remanded sub nom. Greater Phila. Chamber of Commerce v. City of Phila., No. 18-2175, 2020 WL 579733 (3d Cir. Feb. 6, 2020).
6 Chamber of Commerce for Greater Phila., 319 F. Supp. 3d at 803–04.
7 Id. at 780 n.4.
8 Greater Phila. Chamber of Commerce v. City of Phila., No. 18-2175, 2020 WL 579733, at *2 (3d Cir. Feb. 6, 2020).
9 Id. at *2, *18.
10 Id. at **1–2.
11 Id. at *18, **20–22.
12 Chamber of Commerce for Greater Phila., 319 F. Supp. 3d at 798.
13 Greater Phila. Chamber of Commerce, No. 18-2175, 2020 WL 579733, at **3–9.
14 Id. at *2.
15 Greater Phila. Chamber of Commerce, No. 18-2175, 2020 WL 579733, at *9.
16 Id. at *18.
17 Id. at *29.
18 For a more in-depth discussion of the ordinance, see a prior Littler article: The Philadelphia Wage Equity Bill Will Ban Employers From Asking Prospective Employees About Their Past Wages and Fringe Benefits.
19 Phila., Pa., Code § 9-1131(2)(c). The ordinance defines the term "wage" broadly to include "all earnings of an employee, regardless of whether determined on time, task, piece, commission or other method of calculation and including fringe benefits, wage supplements, or other compensation whether payable by the employer from employer funds or from amounts withheld from the employee's pay by the employer." Id.
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