Developments in Equal Pay Litigation

© 2021 Seyfarth Shaw LLP Developments in Equal Pay Litigation | 3 C. State And Local Pay Equity Initiatives In addition to more robust enforcement provisions, as described above, a number of states and local jurisdictions have also begun to experiment with other pay equity initiatives. Those have generally come in the form of salary history bans and pay transparency laws. Salary history bans generally prohibit or limit employers’ ability to gather information about a candidate’s past salary and/or use that information when making compensation decisions. Pay transparency laws generally require employers to submit reports of demographic and pay data about their workforce to state agencies. What the state agencies will do with such information is often not explained directly. But many employers believe that it will be used to target employers for enforcement activity. 1. State And Local Salary History Bans State and local salary history bans generally prohibit employers from requesting the salary history of job applicants and limit an employer’s ability to consider prior salary when making offers to new hires. Those laws have sometimes been vigorously opposed by various business groups. On February 6, 2020, the U.S. Court of Appeals for the Third Circuit decided Greater Philadelphia Chamber of Commerce v. City of Philadelphia , 15 which rejected a number of arguments against those bans. The lawsuit involved the 2017 Philadelphia Wage Equity Ordinance, which, among other things, prohibits employers from inquiring into or relying upon job applicants’ prior wage history in establishing starting pay. The Ordinance consisted of two provisions: the “Inquiry Provision” and the “Reliance Provision.” The Inquiry Provision prohibits an employer from asking about a prospective employee’s wage history, and the Reliance Provision prohibits an employer from relying on wage history at any point in the process of setting or negotiating a prospective employee’s wage. The Ordinance was challenged in federal district court on constitutional grounds on the basis that it infringes upon employers’ freedom of speech. The district court invalidated the Inquiry Provision, holding that it violated the First Amendment because it could not withstand even the less stringent analysis under intermediate scrutiny. 16 But because the Reliance Provision targets conduct rather than speech, the district court held that no First Amendment analysis was required and such provision was upheld . 17 The Third Circuit then held that the regulated speech is not related to illegal activity because not all uses of wage history are illegal. The court also agreed that solving the pay gap is a substantial government interest and that the provision directly advances that interest. 18 It also determined that the Inquiry 15 Greater Philadelphia Chamber of Commerce v. City of Philadelphia , 949 F.3d 116 (3d Cir. 2020). 16 Chamber of Commerce for Greater Philadelphia v. City of Philadelphia , 319 F. Supp. 3d 773, 785 (E.D. Pa. 2018). 17 Id . at 801, 803. Initially, the Third Circuit agreed with the district court that the Reliance Provision does not regulate speech, as it does not implicate the spoken or written word. Further, the Third Circuit held that: (1) the provision leaves employers free to discuss an applicant’s value by his or her qualifications; (2) the provision does not impede on free speech as it is not triggered during negotiation of an employment contract but is triggered “at any stage in the employment drafting process”; (3) even if the provision is triggered by negotiations, its “incidental impact” on speech is not an unconstitutional violation of the freedom of speech; and (4) the provision is distinguishable from other cases involving laborers’ abilities to advertise their availability for work because that is “prototypical speech that depends on spoken or written communication.” Greater Philadelphia , 949 F.3d at 136. Regarding the Inquiry Provision, the Third Circuit initially agreed with the district court in finding that the regulated expression is “commercial speech” because the affected communications occur in the context of employment negotiations, which propose a commercial transaction where “the economic motive is clear.” 17 Recognizing that “the Supreme Court has consistently applied intermediate scrutiny to commercial speech restrictions . . . particularly when the challenged speech involves an offer of employment,” the Third Circuit rejected the application of strict scrutiny. Id. at 138. The Third Circuit therefore applied an intermediate scrutiny standard, which required it to analyze the following factors: (1) whether the speech concerns lawful activity and is not misleading; (2) whether the asserted governmental interest is substantial; (3) whether the regulation directly advances the governmental interest asserted; and (4) whether the regulation is not more extensive than is necessary to serve that interest. Id. 18 Id. at 143. The court found that the City Council relied upon sufficient testimony and studies to support the enactment of the Ordinance, including that: (1) the wage gap is substantial and real; (2) numerous experiments have been conducted, which controlled for such variables as education, work experience, and academic achievement, still finding a wage gap; (3) researchers have long attributed the gap to discrimination; (4) existing civil rights laws have been inadequate to close the wage gap; and (5) witnesses who reviewed the data concluded that relying on wage history can perpetuate gender and race discrimination. Id.