Appeals court weighing whether city’s salary-history ban violates employers’ free speech

Having heard arguments in a case that could have national implications, federal judges in Philadelphia are considering whether a local ordinance aimed at closing the wage gap infringes on employers’ right to free speech.

Attorneys representing the Greater Philadelphia Chamber of Commerce and the City of Philadelphia on Friday argued before the U.S. Court of Appeals for the Third Circuit over a law passed in 2017 that prohibits employers in the city from asking a prospective employee about his or her salary history. The law, over which the chamber sued the city, also says employers can’t use salary history information to set wages.

Proponents of the Wage Equity Law, which include the city and women’s advocates, say it will cut down on gender- and race-based discrimination that contributes to the wage gap. Opponents in the business community, including Comcast Corp., say employers have a First Amendment right to ask about salary history.

Studies suggest women on average make about 80 cents for every dollar a man earns. That gap is even higher for women of color.

Last May, U.S. District Judge Mitchell S. Goldberg halted the provision in Philadelphia’s law that prohibits employers from asking about salary history, ruling it violates free-speech guarantees under the First Amendment. But he agreed with the city that the government could bar employers from actually using that salary history to set wages. Both the chamber and the city appealed the decision to the Third Circuit.

Philadelphia was the first city in the country to pass a salary-history ban, following just Massachusetts. After Philadelphia’s passage, more than a dozen other states and municipalities followed suit. Federal court observers have said those other jurisdictions should watch the Philadelphia case closely — it could ultimately be decided by the U.S. Supreme Court.

At issue Friday was largely whether the city is required to prove the ordinance will actually solve the wage gap problem.

Miguel A. Estrada, an attorney who argued on behalf of the chamber, told a panel of three judges that the city must meet a high threshold of proof that the ordinance works, because it’s attempting to restrict speech. He said while the chamber agrees that addressing the wage gap is a worthy cause, the city hasn’t proved salary history causes discrimination in setting wages.

City Solicitor Marcel S. Pratt said the city doesn’t have to. He said while labor experts agree salary history contributes to discrimination in setting wages, there aren’t long-term data on the efficacy of such a ban because it hadn’t been implemented elsewhere when Philadelphia passed its bill. Legislatures “try measures based on the evidence, and if something doesn’t work, then they tweak it," he said.

Estrada said governments have some leeway “in solving problems one step at a time.” But he said there’s a caveat “that when they do that, they cannot do that for reasons related to the suppression of speech.”

Pratt added that it’s “simple common sense” that the measure would at least cut down on discrimination. The idea is that if women or people of color make less than their male counterparts in their first jobs, that wage gap will only continue over time when future employers use salary histories to set pay.

“When you’re a woman or a person of color… if employers are going to use your private salary history as a basis to pay you, your baseline is going to be lower,” he said, “and that’s precisely because of the wage gap and because your prior salary history is tainted by discrimination.”

City Council passed the bill unanimously in December 2016. Under the measure, job applicants who believed the law was violated would have been able to file with the city’s Commission on Human Relations, which could then fine the employer $2,000 plus additional damages.

Lori Armstrong Halber, an employment law attorney and partner at Fisher Phillips’ Philadelphia office, said the case is the first court test of this type of law, “so the rest of the country is watching as to how this shakes out.” She said that if the Third Circuit decision is appealed, the Supreme Court could decide to take up the case or, she said, could wait until another circuit takes up a similar ban, which could result in a split in the circuits that the high court would be in a position to resolve.

On a broader level, Halber said, the ordinance is part of a wider movement of support for women “in a very concerted way that we haven’t seen” before.

“There is a lot of movement politically and socially to fix inequities on the basis of gender,” she said. But she added: “I don’t know that it saves this ordinance.”