In 2017, the City of Philadelphia enacted the Wage Equity Ordinance to address the pay gap between men and women and between different races and ethnicities. The Ordinance contains two provisions: the “Inquiry Provision,” which prohibits employers from asking about a prospective employee’s wage history; and the “Reliance Provision,” which prohibits an employer from relying on wage history at any point in the process of setting or negotiating a prospective employee’s wage. Mayor Jim Kenny signed the Ordinance into law in January 2017 after it was unanimously passed by Philadelphia City Council.

The Greater Philadelphia Chamber of Commerce, however, filed a lawsuit alleging that both provisions of the Wage Equity Ordinance infringed on the chamber and its members’ First Amendment freedom of speech rights. In the Chamber of Commerce for Greater Philadelphia v. City of Philadelphia et al., the Honorable Mitchell Goldberg from the Eastern District of Pennsylvania granted the chamber a preliminary injunction on the Inquiry Provision in April 2018, holding that the Ordinance violates employers’ freedom of speech rights. Judge Goldberg, however, upheld the Reliance Provision, which prohibits reliance on wage history, based on the court’s conclusion that such reliance did not implicate protected speech. In other words, Judge Goldberg found that an employer could ask about a candidate’s salary history, but could not use the information. Both parties appealed to the Third Circuit Court of Appeals.

On Thursday, February 6, 2020, the Third Circuit overturned Judge Goldberg’s decision, ending an arduous three-year fight over Philadelphia’s wage equity bill, reinstating the Ordinance in full. The Third Circuit found that although the Inquiry Provision regulates speech, it passes the intermediate scrutiny test applied to commercial speech. The Third Circuit also found that the City of Philadelphia has a substantial interest in closing the wage gap and that the Ordinance directly “advances the Government’s interest in a direct and material way.” Whereas Judge Goldberg had concluded that the evidence did not support the premise that Philadelphia’s ban would reduce pay disparity, the Third Circuit found that the city “made a well-reasoned judgment on the testimony presented to it and the unrefuted existence of the wage gap that banning wage history inquiries would prevent further perpetuation of gender and race discrimination in this context.”

Philadelphia is one of several cities and some states that have since enacted salary history laws that bar employers from asking applicants about how much they have earned in the past. This Third Circuit decision could have wide-reaching implications in the ever-growing wage-equity movement, which has gained greater steam in the past decade. Most significantly is the decision’s ramifications in Philadelphia. Since employers in Philadelphia are now on notice that they barred from asking job applicants their salary histories, violations of the Wage Equity Ordinance have real consequences. Employers who violate the Ordinance could face being penalized by Philadelphia’s Commission on Human Relations (PCHR). The PCHR has the power to order the company to cease and desist the unlawful action, provide equitable or injunctive relief, require the payment of compensatory damages and attorney fees, and order the payment of punitive damages of up to $2,000 per violation. Given that consequences of violating the Ordinance can have major repercussions for employers, businesses should re-evaluate their hiring questionnaires and examine their on-boarding processes to eliminate any inquiries about an applicant’s salary history.