We previously suggested that the “city of brotherly love” was setting a bad example for her sister cities because Philadelphia enacted an ordinance prohibiting employers both from making inquiries about an applicant’s wage or salary history and from using any information that they might have on an applicant’s pay history. At a policy level, these sorts of regulatory restrictions are inappropriate at the local level because employment law standards should be uniform as a matter of state law to minimize confusion, especially for companies with mobile employees. But Philadelphia’s ordinance is also constitutionally problematic. NFIB joined in an amicus brief arguing that Philadelphia’s ordinance violated the First Amendment in restricting what questions employers may ask during the application and interview process.
A Mixed-Bag Decision for Philadelphia Employers
The exciting news is that Judge Goldberg of the Eastern District of Pennsylvania Federal District Court issued an opinion agreeing with NFIB Small Business Legal Center’s argument and holding Philadelphia’s ordinance partially unconstitutional as an improper restriction on free speech. This makes sense because government bears a particularly heavy burden to justify restrictions on speech, even when commercial actors are involved. Unfortunately, Judge Goldberg upheld the city’s prohibition against employers using information on wage or salary history when making decisions on what to pay an employee.
Therefore, the result is much the same as in the Ninth Circuit’s recent Equal Pay Act decision in Ruiz. Theoretically an employer might ask job applicants about their wage or salary history; however, there is no point in doing so if the employer is prohibited from relying on that information when making decisions about how to compensate an employee.
What Information Can an Employer Safely Rely Upon in Setting Wages or Salary?
Even in jurisdictions prohibiting questions about salary history or use of such information, employers can rely on legitimate business justifications for pay differentials. For example, an employer might compensate employees working in the same job differently if one has greater experience, education, accreditations, or better performance. Or in some cases differences in the cost of living or cost of labor may come into play where a company has employees working in different regions. Moreover, nothing prohibits employers from asking an applicant about their desired salary range.
