Hunton Employment & Labor Perspectives

The Third Circuit Court of Appeals ruled Thursday that the City of Philadelphia may enforce its law prohibiting employers from asking applicants about their salary history.

The decision, which overturned a preliminary injunction issued in the district court, upheld the constitutionality of the Philadelphia law under the First Amendment.  The Court held that the law infringed on the free speech rights of employers, but it did not violate the First Amendment because it was narrowly tailored to address a substantial government interest.

The Philadelphia law contains two elements – an inquiry provision and a reliance provision.  The inquiry provision bans employers from asking about an applicant’s previous salaries or wage history during the application process.  The reliance provision prohibits employers from relying on any salary information it learns about an applicant at any point in the process of setting or negotiating a prospective employee’s wage.  Only the inquiry provision was at issue in front of the Third Circuit.

The Philadelphia Chamber of Commerce argued that the city failed to consider sufficient evidence when it enacted the law to address the wage gap between white male workers compared to women and minority workers.  Because the city enacted the law based on a limited record, the Chamber argued, it could not show that the speech restriction imposed by the law actually furthered the government interest it asserted – to close the wage gap.

But the Court found the City relied on more than enough empirical evidence to support the law.  Specifically, four witnesses testified before City Council about why the law would help address the wage gap, and why other legislative attempts to address the disparities in pay failed.  On that record, the Court held the city met its burden to show the law directly advanced its substantial government interest.

The Court applied intermediate, rather than strict, scrutiny in analyzing the law because it implicated commercial speech and was viewpoint neutral.  Thus, it applied the Supreme Court’s Central Hudson test and considered three elements: (1) whether the government had a substantial interest in the restriction; (2) whether the restriction directly advanced the interest; and (3) whether the restriction was more extensive than necessary to serve the government’s interest.

The Court held that the law’s restriction was fairly limited, and that the record clearly evidenced that it could advance the city’s goal in closing the wage gap.  Although the evidence in the case was not decisive that the law would fix the wage gap, the Court noted that when governments pursue innovative solutions to problems, it is unlikely they can provide detailed proof of efficacy because such solutions had not been explored previously.

The Third Circuit decision may have implications nationally, as the Philadelphia’s salary inquiry law is just one of many similar provisions enacted by states and localities across the country.  We have written about the salary inquiry laws in  New York, Illinois, and California previously on the blog.

With this new decision upholding the constitutionality of such restrictions, it is likely the trend to curtail employers’ ability to inquire about applicant salary histories will continue.  Employers are encouraged to contact counsel to seek advice on questions they can ask lawfully during the interview and hiring process that can assist in determining the suitability of an applicant.