In early 2017, many workers’ rights advocates in Philadelphia gained a newfound appreciation for the city’s famed brotherly love. When Mayor Jim Kenney added his signature to a new law on January 23, Philly earned the unique distinction of being the first U.S. city to prohibit employers in the private sector from inquiring about applicants’ salary histories.
As with many ordinances, however, the changes weren’t all smooth sailing. Just weeks before the law was set to go into effect, the Chamber of Commerce for Greater Philadelphia brought legal challenges on the grounds of its purported unconstitutionality. Here’s how events played out and why.
The Law Explained
As the Society for Human Resource Management noted, lawmakers structured the ordinance to help close the wage gap between males and females in Pennsylvania. The rules incorporated various stipulations to bring about the desired effect, like barring employers from:
- Using independently acquired job candidate salary data without that individual’s knowledge and express permission,
- Directly asking job applicants to share their previous salaries,
- Mandating that prospects reveal their salary histories to gain employment, or
- Punishing or retaliating against job candidates who decline to disclose salary details.
Observers predict that the scope of this law will impact employers headquartered outside of Philly city limits. The rule’s language applies to anyone who does business in Philly, regardless whether they participate in such activities via third parties, like their employees. Enterprises that violate the provisions may receive fines of $2,000 per instance.
Setbacks Along the Way
Naturally, the new rule became the subject of disputes even before its passage. Comcast Communications threatened to bring legal action against the city on the grounds that its First Amendment rights were under assault, and other companies also groused about the perceived burdens of compliance.
The Chamber of Commerce took formal action by filing a district court motion seeking a preliminary injunction on April 6, 2017. This filing occurred a little less than two months before the law was scheduled to go into effect in late May, and it called the rule’s future into question.
The Judicial Response
The Eastern District of Pennsylvania court decided to stay the law in response to the filing. Many proponents saw this as an indicator that employee rights would face an even steeper uphill battle than they already had. When the City of Philadelphia voluntarily postponed implementing the rule indefinitely, some considered it a major setback.
In early June, however, the city filed a motion to have the lawsuit dismissed because it didn’t specify how the legislation would injure businesses. The district court agreed on the grounds that the original complaint failed to prove which of the Chamber members would suffer harm.
Why Did The Ruling Make Sense?
By not providing the city with the identity of any enterprises that the law impacted adversely, the Chamber made it impossible for the government to respond to its legal action. Whether such a response might have entailed a modification to the rule became a moot point. It may have also helped that the city seemed willing to hear the other side out by initially delaying the ordinance of its own accord.
The End of the Story?
It’s unclear whether the law might face future obstacles. At the time of this writing, the Chamber had received leave from the court to amend its complaint.
Placing a new filing might seem straightforward on the surface, but it could pose particular challenges for the complainant. The Chamber would have to specifically identify companies that currently rely on asking prospective employees about their salary histories during interviews. Although it’s not illegal to take such actions as of yet, such a revelation might be a bad PR move for the enterprise in question.
Even if the Chamber fails to modify its original complaint, certain employers might resist their obligations. Some will surely try to find ways around the law.
For instance, given the widespread prevalence of highly accurate online real estate pricing tools, it’s not unreasonable to assume that a company could estimate a candidate’s salary histories based on where they lived. While it won’t be legal to ask ex-employers how much they paid a candidate without obtaining the individual’s willing permission, there’s nothing stopping HR teams from gathering their own baseline data via publicly available sources like job listings. Companies that engage in such activities may find themselves in the crosshairs for new legislation and penalties.
The Challenges of Compliance
Of course, not all employers are being dragged into the future kicking and screaming. There are undoubtedly many business leaders who believe in the wage-equality principles underlying the laws and want to support their advancement. For these enterprises, the question becomes one of how to implement effective compliance practices and hiring governance.
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Rethinking HR Acquisition
Companies that do business in or around Philly may need to reassess their hiring practices and onboarding policies. The intent of the law is to provide more equitable pay across the board. Firms might benefit from revising their onboarding training, job application forms and interviewer scripts.
Meeting the Legal Requirements
Although Philly may be the first locale to pass such a pay-gap ordinance, it’s far from the last. Imminent legislation in Massachusetts, California, Washington D.C. and other places suggests that employment equity is becoming increasingly important as salary history inquiries go the way of the dinosaurs. Companies that want to keep up with a variance of regional and jurisdictional laws may find it beneficial to consult with a compliance specialist to ensure that they’re fulfilling their evolving responsibilities.
About Karl Heideck
Karl Heideck has been a Hire Counsel-listed attorney since 2015. When he’s not furnishing employers with risk management and compliance services, he authors a popular blog that helps Pennsylvanians understand how various laws work.
Karl Heideck earned his law degree from James E. Beasley School of Law at Temple University in 2009 after earning an undergraduate degree from Swarthmore College in 2003. In addition to practicing independently on behalf of private citizens and companies, he held various legal positions with Philadelphia law firms for over a decade. At Pepper Hamilton LLP, Mr. Heideck was a practicing project attorney, and he was a Conrad O’Brien associate. Today Karl works hard to serve the needs of all Pennsylvanians from his base of operations in Jenkintown, PA.
For more information, follow Karl Heideck on Twitter.
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