Recent Developments in Wage Equity Legislation: Philadelphia Becomes the First U.S. City to Ban Employers from Inquiring About Wage History

by / Monday, 05 June 2017 / Published in Labor and Employment, News

On January 23, 2017, Philadelphia Mayor Jim Kenney signed into law Bill No.
160840, which amends the Philadelphia Fair Practices Ordinance and prohibits employers from inquiring about prospective employees’ salary histories.

Following on the heels of the passage of similar legislation in Massachusetts which became the first state to prohibit employers from requiring employees to disclose wage history as a condition of employment-Bill No. 160840 passed with unanimous approval by the Philadelphia City Council. This ordinance is the first of its kind in a United States city; however, similar legislation has been introduced in New York City and at the state level in Pennsylvania and New Jersey.

The amended ordinance makes it unlawful for an employer, employment agency, or an agent thereof to:

  • Inquire about an applicant’s wage history or require disclosure of an applicant’s wage history;
  • Condition employment, or consideration for employment, on disclosure of wage history;
  • Rely on the wage history of an applicant in determining that individuals at any stage of the employment process, unless the applicant knowingly and willingly disclosed his or her wage history to the employer; or
  • Retaliate against an applicant for failing to comply with an inquiry regarding wage history or opposing an employer’s alleged violation of the Ordinance.

“Employer” is broadly defined to include entities that do business in Philadelphia, and likely will apply to employers that hire employees to physically or remotely work at a location within the city. The ordinance allows for enforcement by the Philadelphia Human Relations Commission and a private cause of action, with remedies and

penalties including compensatory damages, punitive damages, injunctive relief, attorney’s fees, and costs.

The objective of the ordinance is to promote wage equity by curbing discrimination in the hiring process. Specifically, the original bill cites a 2015 U.S. Census Bureau report that found that women in Pennsylvania earn 79 cents for every dollar a man makes, with women of color typically earning even less. Accordingly, the City Council found that inquiring about wage history can perpetuate that existing gap because prior wages would serve as the basis for setting the compensation for the current position. Proponents of the bill argue that the responsibilities of a position should determine the appropriate compensation-not the prior wages earned by an applicant.

The passage of the ordinance was not without controversy, and its viability has been called into question by members of the business community and the Pennsylvania Legislature. For example, Comcast threatened to sue Philadelphia for a purported violation of employers’ First Amendment rights, claiming that there is no evidence to suggest that inquiring about wage history perpetuates discrimination, and therefore Philadelphia cannot justify curtailing employers’ rights to ask. The Philadelphia Chamber of Commerce has echoed Comcast’s concerns regarding evidentiary support, and argues that preventing employers from questioning applicants about wage history will prevent job growth and business expansion.

The ordinance faces challenges at the state level, as well. On February 8, 2017, the Pennsylvania Senate passed Senate Bill 241, which prohibits discrimination in pay based upon gender, retaliation for filing complaints about wage discrimination, and policies that prohibit employees from discussing their salaries. Interestingly, Bill No.
241 included an eleventh-hour amendment that states that any local ordinance or rule concerning the subject matter of the act-prohibiting discrimination in wage rates because of sex-will be preempted and superseded by the state law. In other words, it not only specifically will override the Philadelphia ordinance (with no replacement) if enacted, but also will prevent any other locality from enacting similar legislation.

The ordinance is supposed to take effect on May 23, 2017, although its fate in light of the current and potential challenges is unclear. Accordingly, employers who employ individuals in Philadelphia should consider modifying their application process to prevent inquiry into or consideration of wage history. Additionally, to ensure that an employer can appropriately consider an applicant’s wage expectations (independent of history) and to protect against claims if an applicant willingly discloses wage history, it is highly recommended that employers provide all applicants with a written disclosure of the applicant’s rights under the Fair Practices Ordinance. Finally, to ensure continued compliance, employers both inside Philadelphia and across the state should closely monitor the progress of this ordinance and its challenges, the state legislation, and the future state or local legislation that is likely to follow.

If you have any questions concerning this or other legal issues, please contact Erin R. Kawa (717.909.1624 or ekawa@shumakerwilliams.com  at Shumaker Williams, P.C., PRLA’s General Counsel.

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