Labor & Employment Law Daily Philadelphia’s salary history ordinance survives constitutional challenges
News
Monday, February 10, 2020

Philadelphia’s salary history ordinance survives constitutional challenges

By Ronald Miller, J.D.

The ordinance simply attempts to prevent the employer from unknowingly incorporating past wage discrimination into the terms of an applicant’s job offer.

The Chamber of Commerce has not shown a likelihood of success on the merits of its constitutional challenge to the “Reliance Provision” part of a Philadelphia ordinance that prohibits an employer from relying on an applicant’s wage history in setting an employee’s wage. Therefore, the district court correctly refused to enjoin enforcement of the provision, ruled the Third Circuit. However, the district court’s analysis of the “Inquiry Provision” applied a much higher standard than required. Although the Inquiry Provision clearly regulated speech because it prevented employers from asking potential applicants specific questions, the city enacted the provision in an attempt to address the persistent problem of the pay gap, and the record was clearly sufficient to withstand this First Amendment challenge. Accordingly, the appeals court vacated the district court’s preliminary injunction as to this provision (Greater Philadelphia Chamber of Commerce v. City of Philadelphia, February 6, 2020, McKee, T.).

Pay gap. According to the 2015 census, women in Pennsylvania earn 79 cents for every dollar earned by similarly situated men. For women of color, the wage gap is even more profound. In response to this persistent wage disparity, the City of Philadelphia in 2017 enacted the ordinance at the center of this dispute. The ordinance contains two provisions: the “Inquiry Provision” prohibits Philadelphia-based employers from asking prospective hires about their wage history. The “Reliance Provision” prohibits an employer from relying on an applicant’s wage history in setting or negotiating a prospective employee’s wage at any point in the hiring process.

The Chamber of Commerce filed this suit alleging that both provisions of the ordinance infringe on the freedom of speech of the Chamber and its members. Although the Chamber acknowledged the existence of the pay gap, and that the city has a substantial governmental interest in addressing it, it argued that the city passed the ordinance “with only the barest of legislative records,” and therefore did not present sufficient evidence to establish that the ordinance would satisfy the city’s objective. Accordingly, the Chamber claimed that the ordinance cannot survive a First Amendment challenge under strict or intermediate scrutiny.

The Chamber moved for a preliminary injunction alleging that the ordinance violated the First Amendment.

Inquiry Provision enjoined. The district court agreed with the Chamber that the Inquiry Provision violated the First Amendment speech rights of employers and invalidated that part of the ordinance. Reasoning that the Inquiry Provision did implicate speech and that it could not survive even the less stringent intermediate scrutiny required under the First Amendment, the district court granted the Chamber’s motion for preliminary injunction as to that provision.

On review, the Third Circuit concluded that the district court erred in holding that the Inquiry Provision was unconstitutional. It determined that the district court’s analysis of that provision applied a much higher standard than required. Rather, the appropriate inquiry requires courts to determine whether the legislature “has drawn reasonable inferences based on substantial evidence.” The Supreme Court has upheld similar restrictions based on much less evidence than the city presented here, the appeals court noted.

Provision survives intermediate scrutiny. Unlike the Reliance Provision, the appeals court found that the Inquiry Provision clearly regulated speech because it prevented employers from asking potential applicants specific questions. As a consequence, the district court was correct in concluding that it was first necessary to determine the appropriate level of scrutiny to apply to that provision. The appeals court also agreed with the district court that the Inquiry Provision regulated commercial speech and that intermediate scrutiny was the appropriate level of review.

The Inquiry Provision precluded all employers from inquiring into wage history, without focusing on any particular viewpoint or favoring any particular employer or job. It also applies to all employees without regard to the employee’s prior salary or job title. It does limit a prospective employer’s speech, but only to prevent the tentacles of any past wage discrimination from attaching to an employee’s subsequent salary.

However, the appeals court found that the record contained substantial evidence that the wage gap is substantial and real. Based on that substantial evidence, the city council made a reasonable judgment that the wage history ban would further the city’s goal of closing the gap and ameliorating the discrimination inherent in the disparate wages. Moreover, the city offered substantial evidence to support the need for the Inquiry Provision. Importantly, there was substantial evidence of the possibility that the speech restriction could favorably impact a concern that the state actor had a fundamental interest in addressing. Accordingly, the appeals court vacated the district court’s preliminary injunction as to the Inquiry Provision.

Reliance Provision does not impact speech. The Reliance Provision, on the other hand, did not impact speech. As the district court reasoned, the Reliance Provision was “not subject to First Amendment scrutiny because it does not, ‘on its face, it implicate the spoken or written word.’” Rather, it regulated conduct, and so withstood the Chamber’s First Amendment challenge.

On appeal, the Third Circuit found that the district court correctly concluded that the Reliance Provision does not implicate speech. The appeals court rejected the Chamber’s argument that in “formulating a proposed salary,” a prospective employer is “communicating a message about how much that applicant’s labor is worth to the employer.” It pointed out that the provision does not restrict an employer from communicating an applicant’s worth. The employer may still discuss an applicant’s value based on his or her qualifications and abilities. The ordinance simply attempts to prevent the employer from unknowingly incorporating past wage discrimination into the terms of an applicant’s job offer.

Rejected also was the Chamber’s argument that because the Reliance Provision is “triggered” during negotiation of a contract, it necessarily implicates speech. The appeals court noted that the district court recognized that, to the extent that the Reliance Provision has an arguable effect on speech, it is incidental to the targeted reliance and does not place the provision under the First Amendment.

Accordingly, the Chamber had not shown a likelihood of success on the merits of its constitutional challenge to the Reliance Provision, so the district court correctly refused to enjoin enforcement of this part of the ordinance.

Interested in submitting an article?

Submit your information to us today!

Learn More
Employment Law Daily

Labor & Employment Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on labor and employment legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.

Free Trial Learn More