Third Circuit Court Dismisses Lawsuit Challenging Philadelphia Wage History Law
Philadelphia’s Wage History Ordinance lives on, for now. The Ordinance, initially scheduled to take effect on May 23, 2017, has been subject to a federal court stay pending resolution of a lawsuit for a preliminary injunction brought by the Chamber of Commerce for Greater Philadelphia. On May 30, the court dismissed the lawsuit.
The Ordinance prohibits employers in Philadelphia from inquiring about the wage history of prospective employees. It was passed unanimously by the Philadelphia City Council in December 2016 and signed into law by Mayor Jim Kenney on January 23, 2017.
The Ordinance makes it an unlawful employment practice “for an employer, employment agency, or employee or agent thereof” to “inquire about a prospective employee’s wage history, require disclosure of wage history, or condition employment or consideration for an interview or employment on disclosure of wage history.”
It also includes an anti-retaliation provision, prohibiting employers from taking adverse action against an applicant or employee who does not comply with a wage history inquiry.
Employers who fail to comply with the Ordinance can be subject to a private court action once administrative remedies are exhausted. Employers found in violation of the Ordinance would face compensatory and punitive damages, attorneys’ fees, court costs, injunctive relief, and administrative penalties.
The U.S. District Court for the Eastern District of Pennsylvania ordered the stay on April 19. Following briefing by the parties, the court issued an order dismissing the complaint.
The Chamber argued the Ordinance suppresses the free speech rights of employers in violation of the First Amendment to the U.S. Constitution. The Chamber of Commerce for Greater Philadelphia v. City of Philadelphia and Philadelphia Commission on Human Relations, No. 2:17-cv-01548 (E.D. Pa. May 30, 2017).
The Chamber contended the Ordinance only “indirectly” addresses the gender wage gap, the legislation’s prohibitions are not narrowly tailored to achieve its overall goal, and there is no substantial basis for restricting speech. The lawsuit further alleged the employer penalty provisions, which allow punitive damages, fines, and criminal penalties, violate the Due Process Clause of the Fourteenth Amendment.
In addition, the Chamber took issue with the geographic reach of the Ordinance, which ostensibly applies to any employer doing business in Philadelphia. The Chamber argued generally that because the Ordinance regulates activity that may occur outside of Philadelphia, it violates the U.S. Constitution’s Commerce Clause, the Pennsylvania Constitution, and the Pennsylvania Home Rule Act. Along with its Complaint, the Chamber filed a motion for a preliminary injunction seeking to postpone the effective date of the Wage History Ordinance pending the outcome of the litigation.
The Court’s Decision
The court’s dismissal of the lawsuit hinged on its determination that the Chamber did not have standing to bring the lawsuit on behalf of its members. The court noted the Chamber failed to identify a single specific member who would be harmed by the Ordinance. Therefore, it held the Chamber failed to establish that it had associational standing under Article III of the U.S. Constitution to pursue the lawsuit on behalf of its members. The court, however, dismissed the case without prejudice and granted the Chamber leave to amend the Complaint within 14 days.
On a separate front, the Wage History Ordinance continues to face the threat of preemption from the state legislature, where the Pennsylvania Senate has passed a bill to amend the Commonwealth’s Equal Pay Law. Significantly, the bill as written does not prohibit wage history inquiries, but it contains a preemption clause prohibiting local ordinances on the subject.
Implications for Employers
Other localities to have passed laws banning inquiries into salary history include Massachusetts, Puerto Rico, and New York City.
Employers with operations in Philadelphia should continue to prepare for the new obligations and potential penalties by reviewing their policies and practices to ensure compliance with the Ordinance.