On February 6, 2020, the U.S. Court of Appeals for the Third Circuit vacated U.S. District Judge Mitchell S. Goldberg’s prior order partially blocking the City of Philadelphia’s pay equity ordinance from going into effect. The previously enjoined provision of the ordinance, known as the “Inquiry Provision,” prohibits employers from engaging in any of the following behaviors:

• inquiring about a prospective employee’s wage history;

• requiring disclosure of wage history;

• conditioning employment or an interview on the disclosure of wage history; or

• retaliating against a prospective employee for failing to provide his or her wage history.

Employers operating within the city of Philadelphia must now refrain from asking prospective employees about their wage histories at any point prior to making an offer of employment. This restriction complements the already-implemented “Reliance Provision” of the ordinance, which prohibits an employer from relying on a prospective employee’s wage history when determining that person’s wages “at any stage in the employment process,” unless the applicant “knowingly and willingly” discloses his or her wage history.

In reaching its decision, the Third Circuit disputed the district court’s finding that the Inquiry Provision likely violated employers’ rights to free speech. While the Third Circuit agreed with the district court that the Inquiry Provision implicated the First Amendment, it also found that Philadelphia had met its burden of clearing the hurdles of intermediate scrutiny. In contrast to the district court, the Third Circuit found that the record contained “a plethora of evidence” that the wage gap between men and women and between white employees and employees of color “is substantial and real”; that the pay gap could not be explained by such variables as education, work experience, or academic achievement; that discrimination was at least in part responsible for the wage gap; and that relying on wage history perpetuates gender and race discrimination. As a result, the Third Circuit found that the Inquiry Provision did not run afoul of the First Amendment and should be permitted to go into effect.

Key Takeaways

The Philadelphia wage equity ordinance’s Inquiry Provision requires that employers operating within the city of Philadelphia refrain from asking prospective employees about their wage histories. In this context, wage history includes not just prior salary, but also prior commissions, fringe benefits, and other forms of compensation received by a prospective employee. The ordinance’s Reliance Provision requires that Philadelphia employers avoid considering an individual’s prior wage history when making an offer of wages at any stage in the employment process. Employers that violate the ordinance may be subject to civil and/or criminal penalties from the Philadelphia Commission on Human Relations. When evaluating a candidate for employment and deciding to offer a particular wage, Philadelphia employers remain free to consider market salary information obtained from sources other than the applicant, as well as the applicant’s qualifications, work history, skills, prior performance, and fit within the company.