City of Philadelphia Enacts Law Making it Unlawful for Employers to Ask Job Applicants for Their Salary Histories

Philadelphia has been prominently featured in the local and national news lately for enacting new laws that can be classified collectively as having as one of their primary purposes an attempt at “social engineering.”  Just last year, the City enacted an ordinance, popularly referred to as “Ban the Box,” which made it illegal for Philadelphia employers to inquire about a job applicant’s history of criminal convictions.  In so doing, Philadelphia joined a national trend of similar enactments by several other government entities, all motivated by a desire to improve employment prospects for ex-cons. Then, a little later last year, Philadelphia enacted a first-of-its kind soda tax, which, although probably aimed primarily at creating a new source of revenue, was rationalized, in large part, by the Philadelphia City Council that passed it as a measure to try to curb juvenile obesity among inner city children.

Now, Philadelphia has stuck its neck out again trying to control its private employers’ hiring practices and procedures and, thus, so the theory goes, their hiring results.  Motivated by a desire similar to the Ban the Box legislation, the City has now focused its attention on gender-based wage inequality, by enacting legislation making it unlawful for employers to consider a job applicant’s salary history in deciding what salary to offer that candidate.  In so doing, Philadelphia has put itself in the forefront of the attack on gender-based salary inequality.  Massachusetts passed a similar law last year, but, when the new Philadelphia Wage Equity Law becomes effective on May 23, 2017, Philadelphia will become the first US city to make it illegal for an employer to ask a job applicant to reveal his or her salary history.

As it had done with the Ban the Box ordinance, Philadelphia’s City Council made a number of findings on the record in support of the Wage Equity Law.  For example, City Council noted that women in the job market, especially minority women, on average, earn less — in some cases, significantly less — than men in comparable positions.  Specifically, City Council found that, basing salary decisions on an employee’s past earnings history “only serves to perpetuate gender wage inequalities.”  Finally, City Council concluded that the salary for a position should be based upon the responsibilities of the position, rather than an applicant’s prior salary.

What Does The New Law Prohibit?

The Wage Equity Law makes it an unlawful employment practice for an employer or an employment agency to (1) inquire about a prospective employee’s wage history, (2) require disclosure of wage history, (3) condition employment or consideration for an interview or employment on providing a wage history, (4) retaliate against a prospective employee for failing to provide a wage history in response to a request for one, or (5) rely, at any stage of the employment process, upon a wage history provided by a current or former employer in determining the employee’s wages or in negotiating or drafting the employee’s employment contract.  There are 2 exceptions to the law’s prohibitions.  First, the employer can rely on a prospective employee’s wage history if the applicant “knowingly and willingly” disclosed it.  And, second, the law does not apply to any action taken by an employer or employment agency pursuant to a federal, state or local law that specifically authorizes the disclosure or verification of wage history for employment purposes.  As just one example of the second exception, many government positions are authorized by statutes or regulations that include a requirement that the candidate’s employment and salary history be reviewed and verified.

What Is The Likely Impact Of This New Ordinance?

It is difficult to predict whether the Wage Equity Law will have its desired effect.  On the one hand, despite widespread criticism of the new law from the business community, a case certainly can be made that some portion of the apparent gender pay inequality is based on past wage discrimination by other employers, and that this ordinance will, in time, help stop the perpetuation of that inequality.

Eventually, as employers get used to the new law, perhaps they will also get used to the idea of offering salaries based upon the responsibilities of the job, rather than the candidate’s salary at a previous position.  After all, not that long ago, it was standard procedure for employers to inquire about female candidates’ marital status and family plans, but now most employers will readily acknowledge that such questions are discriminatory and should be precluded, as the law now provides.  Perhaps in a few years, as a result of the new ordinance, questions about salary history will be viewed in the same negative light as we now view questions about plans to have children.

In addition, most employers, including those who routinely ask their applicants for past salary information, will acknowledge that trying to hire employees at the lowest possible salary can lead to other employee relations problems for the employer.  Consider, for example, the possible tensions that could be, and, in fact, often are caused by two employees who have the same job responsibilities and comparable performance ratings, but are paid very different salaries due solely to their different salary histories before they came to their current employer.

On the other hand, some critics have suggested, although, to date, no concrete evidence has been presented to support their position, that the Wage Equity Law will actually hurt the movement to equalize salaries.  The theory is that, if employers cannot ask for a candidate’s salary history (or criminal background), they will simply guess or assume one.  For a female candidate, so the theory goes, the employer will assume she has a lower salary and will, in turn, offer her a lower salary.  If the employer’s assumed salary is lower than the candidate’s actual salary, the lack of a salary history, under this set of assumptions, will result in a lower offer than would have been the case if the employer had been able to ask the candidate for her salary history. The proponents of this viewpoint cite as support for their argument what they claim is anecdotal evidence that the Ban the Box law has actually hurt ex-convicts’ chances of landing a job, but there have been no scientific studies performed to date to prove or disprove the assumption.

In addition, employers who want to get around the law will, no doubt, be able to find ways to avoid or work around the law’s restrictions.  Just as employees often seem to know, despite their employers’ best efforts to maintain confidentiality, what their fellow workers are earning, employers will, no doubt, find ways to gather salary histories “off the record” if they really want them.  However, employers who engage in such behavior will run the risk of liability under the Wage Equity Law, which also prohibits reliance on salary history information in determining wages at any step in the employment process, regardless of the source of information.

More importantly, the consequences of getting caught violating the law could be severe.  In addition to having the power to order the hiring or reinstatement of an aggrieved employee, the Philadelphia Commission on Human Relations, which is the agency designated by the ordinance to enforce its provisions, also has the power to award the following relief to any person damaged by a violation of the Wage Equity Law:

  • Back pay
  • Compensatory damages.
  • Punitive damages up to $2,000 per violation.
  • Attorney’s fees and costs incurred by the Commission

The real enforcement hammer in the Wage Equity Law is reserved for repeat offenders, who can be imprisoned for up to 90 days for subsequent violations.        This provision will likely serve as a deterrent to willful violations of the law.

More difficult to assess will be the predictions of critics of the law that it will have a negative impact on the creation of new jobs in Philadelphia.  The Philadelphia Chamber of Commerce, among others, lobbied hard against the bill.  The Chamber criticized the bill as just the latest example of an overly-controlling City government telling companies how to run their businesses.  It warned that the law would hurt job growth and business expansion, claiming that the bill sends the message that “Philadelphia is not open for business.”  Indeed, Philadelphia has been accused in the past of having a reputation for having a high cost of doing business.

Finally, some business leaders, led by David Cohen, a senior vice president of Comcast, which is headquartered in Philadelphia, have challenged the legality of the law, saying that it impinges on employers’ First Amendment rights to ask prospective employees their salary history as one means of determining a fair salary for their new positions.  To date no court challenges to the law have been filed.  However, after City Council approved the new law but before the mayor signed it into law, Comcast’s legal team sent a lengthy memo to the City, which was made public.  The memo threatens a lawsuit against the City if the new law was not vetoed by the mayor, which we now know did not happen.  Instead, Mayor Jim Kenney signed the pending law, which now becomes effective 120 days from the January 23, 2017 signing date.  The ball is now in Comcast’s court whether to sue or not.

What Should Employers Do To Prepare For the Effective Date of the New Ordinance?

Philadelphia employers should begin now to revise their hiring processes and application forms to be ready for the May 23 effective date.  Obviously, written application forms will have to be edited to remove any questions about prior salaries.  More difficult will be training interviewers not to ask questions that they have routinely asked job candidates for countless years, especially for companies that give line managers, rather than human resources department personnel, responsibility for hiring decisions.  Such employers might be better advised to tell all interviewers that they should refrain from any discussion of salary, past, present or future, with job candidates, and that such discussions will be undertaken by human resources personnel trained in the nuances of the Wage Equity Law.

Employers who plan to ask their job applicants for “knowing and willful” waivers of their right not to reveal their salary histories, should be sure to put the request for waiver in a written document to be signed by the candidate.  That notice should explain to the candidate her right not to reveal her salary history and include language that the applicant has agreed, knowingly and willfully, to waive that right and provide the salary history.

What about non-Philadelphia employers who come to the city to recruit employees; does the Wage Equity Law apply to them?  How about an employer located outside the city, an executive of which comes into the city to meet with a job candidate?   And if a Philadelphia resident goes to New York for a job interview with a national employer that happens to have operations in Philadelphia, does the ordinance apply to that situation? As with any new law, the scope and applicability of the law will become clearer as time goes on, as the Philadelphia Commission on Human Relations decides how broadly it intends to try to enforce it, and as the courts rule on the legality of the Commission’s decisions and interpret the gray areas of the law.

 

Philip Kirchner is a shareholder in and former chair of Flaster/Greenberg P.C.’s Commercial Litigation Practice Group, a member of the Labor & Employment and Construction Litigation Practice Groups, and member of the Restaurant & Hospitality, Construction, Nonprofit & Charitable Organizations, Gaming and Alternative & Renewable Energy Industry Groups.

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