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Philadelphia Chamber of Commerce Identifies Businesses Harmed By Philadelphia’s Ban on Salary History Inquiries; Ordinance Remains Stayed Pending Litigation

Published by on July 24, 2017

Philadelphia’s Ordinance is part of a national trend addressing wage disparity between genders and other groups.

On June 13, 2017, the Philadelphia Chamber of Commerce filed an amended complaint with the Eastern District of Pennsylvania alleging that the City of Philadelphia Ordinance 16408 violates the First Amendment’s guarantees of free speech. The City’s Ordinance bars employers from inquiring about a prospective employee’s prior wage and from relying on an employee’s prior wage to set their compensation unless the applicant knowingly and willingly discloses the information.

Signed into law in January 2017 and with an effective date of May 23, 2017, the Ordinance has yet to be enforced following the Chamber’s federal lawsuit and motion for preliminary injunction. The district court stayed enforcement of the Ordinance until resolution of the Chamber’s injunction.

However, before the injunction could be resolved, the City argued that the Chamber lacked standing to bring suit because it failed to identify a business that would be harmed by enforcement of the Ordinance. The court agreed and dismissed the case giving the Chamber two weeks to amend.

The Chamber timely did so with its first amended complaint that identified a diverse group of businesses ranging from the multinational corporation Comcast, to a privately owned Philadelphia construction company that would allegedly suffer harm from enforcement of the Ordinance.

Notwithstanding any additional standing issues, the district court is expected to rule on the Chamber’s preliminary injunction. In its motion, the Chamber primarily argues that it is likely to succeed on the merits of its claim because the City’s “content-based” and “speaker-based” restrictions on speech fail strict and intermediate scrutiny standards of review. Specifically, the Chamber alleges that the City Ordinance is not narrowly tailored to serve the City’s interest in remedying gender-based pay disparities caused by discrimination and indirectly targets discriminatory wage disparities with no evidence that doing so will decrease the disparities.

Allowing the injunction would bar Philadelphia from enforcing the Ordinance until the conclusion of the district court proceedings, an event that could take years, while denying the injunction would allow the City to immediately enforce the Ordinance. Presently, both options are possible and therefore, employers in the Philadelphia area must be prepared to adapt their hiring practices accordingly.

Welter Insight

Philadelphia’s Ordinance is part of a national trend addressing wage disparity between genders and other groups. California, Delaware, Oregon, Massachusetts, New York and New York City have passed similar legislations and numerous other states have proposed their own versions. A common finding among the legislative bodies that pass such legislation, is that using an applicant’s salary history perpetuates a gender pay disparity.

The Philadelphia’s Chamber of Commerce’s lawsuit is the first to test the validity of these new ordinances. If the Chamber succeeds, expect similar challenges throughout the nation. Until then, however, businesses in Philadelphia need to prepare their practices for the possibility of the Ordinance’s immediate enforcement. More importantly and in light of the growing trend to ban inquiries into salary history, employers everywhere need to pay attention to both state and municipal laws to ensure their hiring practices remain lawful.

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