Source - National Employment Perspective

Pay Equity: Philadelphia’s Salary History Ban Upheld by Third Circuit

The Third Circuit Court of Appeals rejected a First Amendment challenge by the Greater Philadelphia Chamber of Commerce to a city ordinance that prohibited employers from inquiring about the wage histories of job candidates, reversing an injunction granted by the district court. Greater Philadelphia Chamber of Commerce v. City of Philadelphia, No. 18-2175, 2020 WL 579733, at *29 (3d Cir. Feb. 6, 2020).

The City of Philadelphia enacted the Ordinance in 2017 to address the “pay gap” suffered by women and minorities. The Ordinance contains two provisions: the Inquiry Provision, which prohibits employers from asking about wage history, and the Reliance Provision, which prohibits employers from relying on wage history to set a prospective employee’s wage.

While the Chamber conceded the existence of the “pay gap,” it argued that, by relying on an allegedly sparse legislative record to pass the Ordinance, the City lacked sufficient evidence to survive First Amendment scrutiny as to both provisions. The district court determined the Reliance Provision did not implicate speech and therefore did not warrant a First Amendment challenge. However, the district court agreed with the Chamber regarding the Inquiry Provision and invalidated that section of the ordinance as unconstitutional. An appeal and cross-appeal followed, with the Chamber arguing both the Reliance and Inquiry Provisions should have been enjoined and the City contending the Inquiry Provision was enforceable.

While the Third Circuit agreed with the district court’s holding that the Reliance Provision did not implicate speech, it disagreed with its analysis as to the Inquiry Provision. The Court began by clarifying that the Inquiry Provision regulated commercial speech (offers of employment) and triggered intermediate scrutiny. Under intermediate scrutiny, the government must have a substantial interest in the restriction, and the challenged restriction must directly advance that interest. The Court found that standard satisfied because (1) as the Chamber conceded, remedying wage discrimination is a substantial government interest; (2) as the evidence made clear, the Ordinance advanced that interest; and (3) the restriction was not more extensive than necessary to achieve the desired objective.

The Court reviewed the evidence described in the legislative background of the Ordinance, namely the testimony of several witnesses who appeared before the City Council to discuss pay inequity as well as an affidavit from a “highly respected labor economist” who concluded wage discrimination is confirmed by the findings of thousands of research studies. The Court also reviewed the declarations filed by Chamber members to support their injunction. The declarations stated that the Ordinance would negatively affect businesses, but otherwise offered nothing to refute or challenge the evidence in support of the Ordinance. While the district court had equated the witness testimony and expert affidavit with “conclusory statements and educated guesses,” the Court noted that the Supreme Court has permitted similar evidence—and even “simple common sense”—to suffice. Therefore, the Court found that the City “drew reasonable inferences based on substantial evidence that the Inquiry Provision would address the wage gap, and the district court erred when it reweighed the evidence and replaced the City’s factual predictions with its own."

Furthermore, the Court found that the Inquiry Provision was narrowly tailored, allowing employers to ask “a wide range” of questions about a candidate’s qualifications while prohibiting only inquiries about a single topic, the candidate’s pay history. Therefore, the Court found that the Inquiry Provision of the Ordinance satisfied intermediate scrutiny.

The Court affirmed the denial of the injunction as to the Reliance Provision and vacated the grant of the injunction as to the Inquiry Provision, allowing full enforcement of the Ordinance.

The National Employment Perspective's January 2019 issue, “Pay Equity: Update on Philadelphia’s Salary History Ban,” provides helpful background concerning this topic. This topic, of course, is now one that is ever more in the national employment law public policy domain of discussion and application.