Controversial Philadelphia Compensation History Ban Struck Down in Part As Violating First Amendment

In January, 2017, Philadelphia became the first city in the nation to adopt a law prohibiting employers from asking job applicants about their salary/wage histories. Philadelphia’s ordinance not only prohibits employers from asking an applicant about compensation history, it also prohibits an employer from relying on such information in determining an employee’s compensation.  The stated rationale for this ordinance is to address the problem of wage inequality for women and minorities, which is believed to be perpetuated by allowing employers to formulate job offers based on historically lower earnings.  Similar laws have since been enacted in other states and cities.

On April 30, 2018, District Judge Mitchell S. Goldberg of the United States District Court for the Eastern District of Pennsylvania issued a decision, in a case brought by the Chamber of Commerce, which strikes down part of the Philadelphia ordinance as unconstitutional. Judge Goldberg ruled that the ordinance violates the First Amendment to the extent it prohibits employers from asking applicants about compensation history, even though the Constitution generally affords lesser protection to “commercial speech.”  Crucial to Judge Goldberg’s reasoning was his finding that Philadelphia had failed to prevent evidence that the ordinance would actually reduce wage inequalities.  However, Judge Goldberg refused to invalidate that aspect of the ordinance which prohibits employers from relying on compensation history, finding that this prohibition does not implicate any First Amendment rights.

Judge Goldberg’s decision is likely to be appealed and courts throughout the United States are likely to consider similar challenges to laws in other jurisdictions. For now, while employers in Philadelphia are free to ask about an applicant’s past compensation history, they may not rely on such information in formulating a job offer.  This puts employers in a difficult position; an employer who chooses to ask for this information may subject itself to a claim that it relied on the information.

We will provide updates on any appeal and as other courts publish rulings on similar laws. If you have any questions about this matter or any other labor and employment topic, please contact Patrick J. Doran, Esquire at (215) 246-3715 or pdoran@archerlaw.com or any other member of Archer’s Labor and Employment Group in Philadelphia, Pa. at (215) 963-3300; Haddonfield, N.J. at (856) 795-2121; Princeton, N.J. at (609) 580-3700; Hackensack, N.J. at (201) 342-6000; or Wilmington, Del. at (302) 777-4350.