Third Circuit Rules in Favor of Philadelphia Ordinance Banning Inquiry Into the Wage History of Job Applicants

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On February 6, 2020, the U.S. Court of Appeals for the Third Circuit issued a unanimous opinion siding with the City of Philadelphia in favor of a 2017 Ordinance that prohibits an employer from asking about a prospective employee’s wage history (“the Inquiry Provision”) and from relying on wage history at any point in the salary negotiation process (“the Reliance Provision”).

Philadelphia passed the Ordinance to address the disparity in pay of women and minorities, commonly referred to as the “pay gap”. The Greater Philadelphia Chamber of Commerce filed a Complaint and Preliminary Injunction, individually and on behalf of its members, alleging that the Ordinance violated the First Amendment freedom of speech. The Chamber conceded that the pay gap exists, and that the City has a substantial governmental interest in addressing it. However, the Chamber argued that the City did not present sufficient evidence to establish that the Ordinance would satisfy the City’s objective of addressing the pay gap. The Chamber claimed that the Ordinance could not therefore survive its First Amendment challenge under either strict or intermediate scrutiny. The City justified the Ordinance by relying on the testimony of witnesses who testified before the City Council about the pay gap prior to the enactment of the Ordinance, and on an affidavit by Dr. Janice Madden concluding that the “significant and substantial wage differentials by race and gender, which are not explained by credentials or qualifications, persist.”

The district court granted the Chamber’s motion for a preliminary injunction as to the Inquiry Provision, holding that it likely violated the Chamber’s and its members’ free speech rights. However, it found that the Reliance Provision, which prohibits relying on an applicant’s wage history at any point in the process, regulated conduct rather than speech. Accordingly, the court refused to enjoin the Reliance Provision. 

In 67-page decision, the Third Circuit concluded that the district court erred in holding that the Inquiry Provision was unconstitutional, as the lower court applied a much higher standard than required. The Appeals Court explained that the Supreme Court has not demanded legislative certainty or the production of empirical proof that the adopted legislation would achieve the stated interest even when applying strict scrutiny. The Third Circuit opined that the Supreme Court has upheld similar restrictions based on much less evidence that the City presented here. This gives City officials the green light to begin enforcing the law, while the Chamber is still reviewing potential next steps. The Philadelphia Commission on Human Relations is charged with enforcing the law, and employers found in violation could face fines and litigation.