In what might be the first court decision on the issue, a Pennsylvania federal court struck down as unconstitutional part of Philadelphia’s ordinance which prohibited employers from asking about salary history from prospective job candidates or using salary history to set prospective wages.
Responding to the problem of wage inequality for women and minorities, the City of Philadelphia enacted an ordinance to address wage inequities among these individuals. The ordinance prohibited an employer from inquiring about a prospective employee’s wage history (“the Inquiry Provision”); and made it illegal for an employer to rely on wage history “at any stage in the employment process” to determine a salary for an employee (“the Reliance Provision”). The basic premise of the law’s prohibitions is that allowing employers to formulate job offers based on prior wages that are historically lower for women and minorities perpetuates the wage inequity problem.
Not surprisingly, the court held as an unconstitutional the portion of the ordinance prohibiting inquiry by an employer of an applicant’s wage history, finding that this is an infringement of employers’ First Amendment free speech rights. The court upheld the prohibition on using salary history to determine future wages.
This leaves Philadelphia employers in the situation where they can ask about wage history but then cannot use that information to set an applicant’s salary. Much like when an employer asks about a candidate’s age and then rejects their application, regardless of the reason, once the information is requested and an adverse action follows, a certain presumption exists that the two are tied. When an employer asks about salary history from a woman or minority, who historically have lower wages than non-minority men and then sets the salary for that person lower than similarly situated non-minority male workers, the presumption will be that the pay gap is a perpetuation of gender and minority pay inequity.
Many other state and local governments have enacted laws similar to Philadelphia’s ordinance. While courts may uniformly determine that employers have the right to inquire about pay history, but not use it to set salaries, employers must continue to avoid the trap set by even asking the question. The best practice is for employers to set a salary range for its positions and offer a wage within that range determined by experience, skills and other valid qualifications.