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Appeals Court Upholds Municipal Ban on Asking Applicants About Salary History

    Client Alerts
  • February 21, 2020

When looking for reasons to explain the persistent salary gap between male and female employees, worker advocates have focused on initial pay negotiations during the hiring process. If new female employees’ salaries are set at a lower level than male counterparts, these differences are likely to persist throughout employment. One reason for this gap may be employers setting starting salaries based on what a worker made at her last job. If this salary was reduced due to discrimination, using it as a factor in determining starting wages carries those practices over to the new employer.

As a result of these concerns, some states and municipalities have debated measures that would prohibit employers from asking about or using salary history as a factor in setting starting wages. In 2017, the City of Philadelphia adopted an ordinance prohibiting both questions over salary history, as well as employers relying on this information when setting or negotiating such salaries. The Chamber of Commerce filed a federal lawsuit challenging the ordinance on the basis that it infringes on employers’ First Amendment rights to free speech.

Earlier this month, the Third Circuit Court of Appeals rejected this claim, finding that the Philadelphia ordinance meets constitutional requirements. In Greater Philadelphia Chamber of Commerce v. City of Philadelphia, the court reversed a lower court decision enjoining the ordinance, finding that the city demonstrated a fundamental interest in addressing the wage gap issue. This interest overcame any restrictions on speech imposed by the ordinance through prohibiting questions about salary history. The Third Circuit also found that the prohibition on using wage history information to set salaries did not implicate First Amendment rights.

Unless the U.S. Supreme Court decides to review this decision, it should encourage other cities and states to consider similar measures. Employers should carefully consider and document how starting salaries are set and conduct internal reviews to make certain that gender or other biases are not entering the decision-making process.