CHAMBER OF COMMERCE FOR GREATER PHILADELPHIA v. CITY OF PHILADELPHIA: UNSUPPORTED AS A MATTER OF FACT, UNJUSTIFIED AS A MATTER OF LAW

By: Nathan Webster, Volume 104 Staff Member

The pay-gap between men and women in the United States is well-established. Hispanic women make 58 cents for every dollar a white man makes.[1] Black women make 67 cents for every dollar earned by a white man.[2] White women make 79 cents.[3] Such disparities also cut across genders, with different racial groups within the same gender showing marked disparities. For instance, in 2015, white men’s average hourly wage was $21, while black men only earned $15 dollars on average and Hispanic men only earned $14.[4]

Further, the wage gap persists, despite legislation attempting to obviate the issue. For instance, the Equal Pay Act, a federal law mandating equal pay between men and women in the workplace, passed in 1963, yet nearly 60 years later, men still earn more than women.[5] Despite the passage of the Civil Rights Act in 1964, people of color still earn less than white Americans.[6] Unsurprisingly, states are continuing to attempt to close the gap.

One strategy gaining traction among state and local governments are laws and ordinances known as “wage history bans.”[7] Such bans typically prohibit employers from inquiring into a candidate’s wage history when deciding whether to extend an offer of employment.[8] The reasoning behind such laws is thus: if women are paid less from the beginning of their careers, disclosing previous pay at former jobs will depress future earnings, by allowing employers to justify lower wages as being in line with previous employment.[9] Some laws go further than others. Massachusetts’ law prohibits prospective employers from even asking about pay history.[10] Others, like Alabama’s law, only prohibit employers from making adverse employment decisions based on a candidate’s refusal to answer an inquiry into their wage history.[11]

Recently, the stricter variant of wage history ban suffered a setback in federal court. In Chamber of Commerce for Greater Philadelphia. v. City of Philadelphia, the Philadelphia Chamber of Commerce Challenged Philadelphia’s salary history ban.[12] Philadelphia’s ordinance prohibited prospective employers from even inquiring into a candidate’s employment history.[13] The Chamber of Commerce sued, arguing that the “inquiry provision” unconstitutionally restricted employers’ right to free speech.[14] The court began by characterizing the inquiry provision as commercial speech, that is, speech “related solely to the economic interests of the speaker and its audience.”[15] In Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., the Supreme Court held that, for commercial speech to receive First Amendment protections, it must concern lawful activity and not be misleading.[16] If the speech concerns lawful activity and is not misleading, courts must then evaluate whether the government has a substantial interest in regulating the speech.[17] Finally, if the government interest is substantial, the proposed regulation of protected commercial speech will only stand if “the regulation directly advances the governmental interest asserted, and . . . it is not more extensive than is necessary to serve that interest.”[18]

In Chamber of Commerce for Greater Phila. v. City of Phila., the court began by finding that the underlying activity (inquiring into a prospective employee’s salary history) is not unlawful or misleading.[19] Both parties agreed that the City of Philadelphia had a substantial interest in regulating the speech.[20] Unfortunately, the court concluded by finding that there was insubstantial evidence that salary history inquiries depressed subsequent wages and therefore, there was no way of knowing if the salary history ban would directly advance the city’s goal of narrowing the wage gap.[21]

In reaching its decision, the court focused mainly on the City’s evidence. The City offered testimony from six professionals, whose testimony largely consisted of their outlining the wage gap, offering anecdotes of wage discrimination, and surmising that a salary history ban would alleviate the problem.[22] The court was unconvinced, holding that unless the city established that the “harms it recites are real and that . . . [the City’s] restriction will in fact alleviate them to a material degree,” the ordinance could not stand.[23] Mere speculation that the ban would address the problem was, according to the court, insufficient.[24] As such, the court invalidated the ban.

The court’s decision is premised on the assertion that salary history bans do not directly advance the goal of closing the wage gap. Though literature may have so suggested at the time of the decision, subsequent research militates against the Chamber of Commerce analysis. For instance, a recent study indicated that California’s wage gap, after having stagnated for years, decreased noticeably after California passed its salary history ban.[25] Indeed, the author asserts that “adopting a salary history ban increased average weekly female earnings relative to average weekly male earnings,” resulting in a 10.4% decrease in the earnings gap.[26] Similarly, in Massachusetts, studies suggest that applicants who didn’t reveal their salary history tended to earn more than those who did.[27] Similarly, a recent study found that employers with access to wage history tended to call back applicants with lower salaries.[28] Other studies confirm that, in jurisdictions with salary history bans, women’s earnings there are close to 90% of men, compared to 80% nationwide.[29] Such results seem to constitute the very evidence of “direct advancement” required by the Chamber of Commercecourt. Other studies suggest similar results.[30]

One might ask why it is important to ban all inquiries into wage, rather than merely making it illegal for prospective employers to rely on wage history in hiring and other employment decisions. To begin, a total prohibition prevents employers from retaliating against women who refuse to answer legal inquiries into their salary history.[31] Additionally, a total prohibition on inquiries into salary history prevent employers from using salary history in decisions not related to hiring, such as bonuses or raises.[32] Rather than being deterred by the Chamber of Commerce decision, local governments should continue to pass salary history bans. The Chamber of Commerce Decision reflects the limited scholarship of the time in which it was decided. The literature now supports such bans. Municipalities and courts should listen.

[1] Sonam Sheth, Shayanne Gal and Andy Kierz, 7 Charts that Show the Glaring Gap Between Men and Women’s Salaries in the U.S., Business Insider (Aug. 26, 2019, 8:16 AM), https://www.businessinsider.com/gender-wage-pay-gap-charts-2017-3 [https://perma.cc/H6KX-TRAT].

[2] Id.

[3] Id.

[4] Eileen Patten, Racial, Gender Wage Gap Persists in U.S. Despite Some Progress, Pew Research Center: Factank (July 1, 2016), https://www.pewresearch.org/fact-tank/2016/07/01/racial-gender-wage-gaps-persist-in-u-s-despite-some-progress/ [https://perma.cc/4ZPQ-ZSMY].

[5] See Rebecca Sha, The Persisting Gender Pay Gap: Recent Developments in the Law That Address Gender Pay Disparities, American Bar Association: Litigation, (May 16, 2016), https://www.americanbar.org/groups/litigation/committees/diversity-inclusion/articles/2019/spring2019-gender-pay-gap-recent-developments/ [https://perma.cc/NUD6-VWKD].

[6] See Gillian B. White, Searching for the Origins of the Racial Wage Disparity in Jim Crow America, The Atlantic (Feb. 9, 2016), https://www.theatlantic.com/business/archive/2016/02/the-origins-of-the-racial-wage-gap/461892/ [https://perma.cc/6LLD-X9PZ].

[7] See Salary History Bans: A Running List of States and Localities That Have Outlawed Pay History Questions, HR Dive (Updated: Dec 6, 2019), https://www.hrdive.com/news/salary-history-ban-states-list/516662/.

[8] Kristin Wong, Don’t Ask Me About My Salary History, N.Y. Times: In Her Words (Oct. 22, 2019), https://www.nytimes.com/2019/10/22/us/dont-ask-me-about-my-salary-history.html [https://perma.cc/YY67-AL84].

[9] Id.

[10] Mass. Gen. Laws Ann. ch. 149, § 105A(c)(2).

[11] Ala. Code § 25-1-30(c).

[12] 319 F. Supp. 3d 773, 779 (E.D. Pa. 2018).

[13] Id.

[14] Id.

[15] Id. at 782 (quoting Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557 (1980).

[16] Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557 (1980).

[17] Id.

[18] Id.

[19] Chamber of Commerce, 319 F. Supp. 3d, at 787 (E.D. Pa. 2018).

[20] Id.

[21] Id. at 800.

[22] Id. at 789–792.

[23] Id. at 793.

[24] Id.

[25] Drew McNichols, Information and the Persistence of the Gender Wage Gap; Early Evidence from California’s Salary History Ban 10, (Univ. Or., Working Paper), https://ssrn.com/abstract=3277664.

[26] Id.

[27] Lydia Frank, Why Banning Questions About Salary History May Not Improve Pay Equity, H. BUS. REV. (Sept. 2017), https://hbr.org/2017/09/why-banning-questions-about-salary-history-may-not-improve-pay-equity.

[28] Employment Law–Equal Pay Legislation–Oregon Bans Employers from Asking Job Applicants About Prior Salary, Oregon Equal Pay Act of 2017, 2017 Or. Laws Ch. 197, H.B. 2005 (to Be Codified in Scattered Sections of OR. REV. STAT.); 131 HARV. L. REV. 1513, 1519 (2018) (citing Moshe A. Barach & John J. Horton, How Do Employers Use Compensation History?: Evidence from a Field Experiment at 21–22 (CESifo, Working Paper No. 6559, 2017), https://ssrn.com/abstract=3014719 [https://perma.cc/KT5E-ZA6D]).

[29] Ethan Wolff-Mann, State’s Salary History Bans are Already Having Positive Results, Yahoo Finance (Oct. 29, 2019), https://finance.yahoo.com/news/states-salary-ban-inquiries-are-already-having-a-positive-results-164558301.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAIuBzs8mA_yR-rfbwGSlYqwdeef5qTd2GSBOS6ky_9nyZnRXA0avcDdPktxGxT3MabE-LIYG_9c5bapvhzQkJX4cVelpi1wEibHbew5UPB36V4FzC6d2HDhZajNh7_QjBvN9TijmC1AfrQ5iR0RPOcpaO1khZxSJ4EvDfdRPNQUV [https://perma.cc/37EP-BNEZ].

[30] See e.g. Sourav Sinha, Salary History Ban: Gender Pay Gap and Spillover Effects (Yale Univ. working paper), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3458194 (finding that California’s salary history ban decreased the wage gap by by 4.2% points in hourly wages, and by 4.5% points in weekly earnings); Jeffrey Meli, James C. Spindler, Salary History Bans and Gender Discrimination (Univ. Tex. research paper). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3361431 (finding that salary history bans decrease the wage gap); Moshe A. Barach & John J. Horton, How Do Employers Use Compensation History?: Evidence from a Field Experiment (CESifo, Working Paper No. 6559, 2017), https://ssrn.com/abstract=3014719 [https://perma.cc/KT5E-ZA6D] (finding that companies who were unaware of salary histories (versus those who were) were more likely to call back candidates with low salary histories). But see: Abigail Cook, Note, The New Jersey Ban on Salary History Questions: Closing the Gender Wage Gap One Question at a Time, 16 Rutgers J.L. & Pub. Pol’y 1, § (D) (2019) (exhaustively summarizing the efficacy of salary-history bans and citing some studies with ambiguous results).

[31] Lydia Frank, Why Banning Questions About Salary History May Not Improve Pay Equity, H. BUS. REV. (Sept. 2017), https://hbr.org/2017/09/why-banning-questions-about-salary-history-may-not-improve-pay-equity (detailing a study that suggests women who refuse to answer salary history questions earn less than men who refuse to answer).

[32] Id.