Philadelphia’s Wage History Ordinance may not go into effect as scheduled on May 23, 2017. It is subject to a federal court stay pending resolution of a lawsuit for a preliminary injunction brought by the Chamber of Commerce for Greater Philadelphia.  

The Ordinance prohibits employers in Philadelphia from inquiring about the wage history of prospective employees. It was passed unanimously by the Philadelphia City Council in December 2016 and signed into law by Mayor Jim Kenney on January 23, 2017. (For more on the Ordinance, see our articles, Philadelphia to Restrict Wage History in Hiring Decisions and Business Group Challenges Constitutionality of Wage History Ordinance, and blog post, Philadelphia Mayor Signs into Law Legislation to Ban Inquiries into Wage History.)

The Ordinance makes it an unlawful employment practice “for an employer, employment agency, or employee or agent thereof” to “inquire about a prospective employee’s wage history, require disclosure of wage history, or condition employment or consideration for an interview or employment on disclosure of wage history.”

It also includes an anti-retaliation provision, prohibiting employers from taking adverse action against an applicant or employee who does not comply with a wage history inquiry.

Employers who fail to comply with the Ordinance can be subject to a private court action once administrative remedies are exhausted. Employers found in violation of the Ordinance would face compensatory and punitive damages, attorneys’ fees, court costs, injunctive relief, and administrative penalties.

The U.S. District Court for the Eastern District of Pennsylvania ordered the stay on April 19 and issued a separate order instructing the parties to brief the issue of whether the Chamber has Article III standing to bring the action. The final brief addressing the standing issue is due to be filed on May 12. In response to the court-imposed stay, the City of Philadelphia indicated that it would voluntarily postpone implementation of the Ordinance pending complete resolution of the lawsuit.

The Lawsuit

The Chamber argues the Ordinance suppresses the free speech rights of employers in violation of the First Amendment to the United States Constitution. The Chamber of Commerce for Greater Philadelphia v. City of Philadelphia and Philadelphia Commission on Human Relations, No. 17-01548 (E.D. Pa. filed Apr. 6, 2017).

The Chamber contends the Ordinance only “indirectly” addresses the gender wage gap, the legislation’s prohibitions are not narrowly tailored to achieve its overall goal, and there is no substantial basis for restricting speech. The lawsuit further alleges the employer penalty provisions, which allow punitive damages, fines, and criminal penalties, violate the Due Process Clause of the Fourteenth Amendment.

In addition, the Chamber takes issue with the geographic reach of the Ordinance, which ostensibly applies to any employer doing business in Philadelphia. The Chamber argues generally that because the Ordinance regulates activity that may occur outside of Philadelphia, it violates the U.S. Constitution’s Commerce Clause, the Pennsylvania Constitution, and the Pennsylvania Home Rule Act. Along with its Complaint, the Chamber filed a motion for a preliminary injunction seeking to postpone the effective date of the Wage History Ordinance pending the outcome of the litigation.

State Preemption

On a separate front, the Wage History Ordinance faces the threat of preemption from the state legislature, where the Pennsylvania Senate has passed a bill to amend the Commonwealth’s Equal Pay Law. Significantly, the bill as written does not prohibit wage history inquiries, but it contains a preemption clause prohibiting local ordinances on the subject.

Implications for Employers

Other localities to have passed laws banning inquiries into salary history include Massachusetts, Puerto Rico, and New York City. (See our articles, Massachusetts Governor Signs Tough Pay Equity Bill, Puerto Rico Enacts Equal Pay Law, Prohibits Employers from Inquiring about Past Salary History, and New York City Council Approves Legislation Limiting Prospective Employers’ Ability to Obtain and Use Salary History Information.) How the Pennsylvania court decides in the case against the Ordinance likely will be closely watched.

Despite the current stay, employers with operations in Philadelphia should continue to prepare for the new obligations and potential penalties by reviewing their policies and practices to ensure compliance with the Ordinance.