Third Circuit Court of Appeals Rules in Favor of Ban on Philadelphia Employers Asking About Salary History

Greater Philadelphia Chamber of Commerce v. City of Philadelphia; Philadelphia Commission on Human Relations - Third Circuit Court of Appeals

Facts:  In 2017, the City of Philadelphia ("the City") passed an ordinance that prohibited employers in the city from asking an applicant about their salary history (the "inquiry provision") and prohibited relying on salary history at any point in the application/interview process to set or negotiate the applicant's proposed salary (the "reliance provision.")  The Greater Philadelphia Chamber of Commerce ("Chamber") subsequently filed suit on the grounds that the ordinance infringed upon the freedom of speech of the Chamber and its members.

The District Court held that the inquiry provision violated the First Amendment freedom of speech rights of the Chamber and its members and therefore issued a preliminary injunction to prevent it from taking effect.  As to the reliance provision, however, the District Court upheld it on the grounds that it did not impact freedom of speech.  The subsequent appeal to the Third Circuit Court of Appeals followed.

Holding:  As the Court's opinion is quite dense, I think it best to break this down into bite size pieces, starting with the more heavily contested provision in the ordinance.

Inquiry Provision

As for the first part of the ordinance, the Court noted that the U.S. Supreme Court has not required that the enacting authority of an ordinance (in this case the City) achieve legislative certainty or produce empirical proof that the adopted legislation would achieve the stated interest even when applying strict scrutiny.  Instead, the appropriate judicial scrutiny of an ordinance such as this requires a court to determine whether the legislature "has drawn reasonable inferences based on substantial evidence."  However, in First Amendment cases, the initial burden is on the government to prove the law is constitutional. 

In this case, the City sought to enact the ordinance to remedy a pay disparity among women (who earned $.79 for every dollar earned by a similarly situated man) and women of color (who earned $.68 for every dollar earned by a similarly situated man, for black women, and $.56 for every dollar earned by a similarly situated man, for Latina women.)  Prior to passage of the ordinance, the City heard testimony from witnesses that found a pay disparity existed in Philadelphia, and the proposed ordinance could help remedy the problem.  As for the ordinance itself, the Court held that the City has a substantial interest in closing the wage gap and the ordinance directly advances the City's interest in pay equity for workers.  Given how the ordinance was not more extensive than necessary and tailored to accomplish this objective, the Court found that no freedom of speech violation existed and therefore vacated the preliminary injunction issued as to the inquiry provision.

Reliance Provision

At the District Court level, it was found that the reliance provision part of the ordinance did not regulate speech and therefore no First Amendment analysis was needed.  The Court of Appeals agreed with that holding, finding that the reliance provision did not restrain any expressive language.  While the Chamber argued that in "formulating a proposed salary,"a prospective employer is "communicating a message about how much that applicant's labor is worth to the employer", the Court was unswayed.  The reliance provision itself did not prohibit an employer from communicating an applicant's worth.  Rather, the employer would still be allowed to discuss an applicant's value based upon his/her qualifications and abilities.  The ordinance itself only sought to prevent the employer from unknowingly incorporating pas wage discrimination into the terms of the applicant's job offer.  As a result, the employer would remain free to communicate its own valuation of the applicant by making offers at whatever salary the employer deemed appropriate.

Judgment:  The Third Circuit Court of Appeals vacated the District Court's preliminary injunction of the inquiry provision on the grounds that the City of Philadelphia's salary history ban ordinance was reasonably tailored to accomplish the objective of narrowing the pay gap among workers in the City and affirmed the District Court's denial of a preliminary injunction as to the reliance provision on the grounds that since this part of the ordinance did not bar an employer from communicating about an applicant's worth, no freedom of speech violation could exist.

The Takeaway:  To call this 67 page opinion from the Court a dense read would be an understatement.  I encourage readers that are looking for a thorough examination of First Amendment issues throughout various courts over the years to give this opinion a closer look.  For those readers that are looking for a more truncated version, I think this case brief should serve you well.  Regardless of where you fall on the matter, the key takeaway here is that the Third Circuit Court of Appeals has given the green light to the legality of the City of Philadelphia's salary history ban.

Majority Opinion Judge:  Judge McKee

Date:  February 6, 2020

Opinion:  http://www2.ca3.uscourts.gov/opinarch/182175p.pdf