Portion of Philadelphia Salary History Ban Ruled Unconstitutional

Q.  Am I permitted to ask about an applicant’s salary history in Philadelphia?

A.  In a ruling that could provide a roadmap for challenging salary history bans in other jurisdictions, a Philadelphia federal judge issued an opinion on April 30 invalidating a major element of the Philadelphia salary history ordinance enacted by the city in January 2017. Judge Mitchell S. Goldberg held that the portion of the ordinance prohibiting an employer from inquiring about a prospective employee’s wage history is unconstitutional because it violates the First Amendment’s free speech clause. However, Judge Goldberg also held that the portion of the law prohibiting employers from relying on wage history to determine a salary for an employee did not implicate constitutional concerns. Philadelphia employers now find themselves in a difficult position: They are permitted to ask about an applicant’s salary history but cannot rely on that information.

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Tracey E. Diamond and Lee E. Tankle

 

Got Employees in Massachusetts and New Jersey? What You Need to Know as MA and NJ Employers are Mandated to Break the Glass Ceiling

Q.  Are there any Equal Pay Acts that apply specifically to employers in Massachusetts and New Jersey?

A.  On July 1, 2018, an updated equal pay law becomes effective in Massachusetts, referred to as “MEPA” (Massachusetts Equal Pay Act). MEPA covers nearly all Massachusetts employers, irrespective of size, and most employees, including full-time, part-time, seasonal, per-diem, and temporary employees. Employees who telecommute to a primary place of work in Massachusetts also are covered.

The Massachusetts law provides that “[n]o employer shall discriminate in any way on the basis of gender in the payment of wages, or pay any person in its employ a salary or wage rate less than the rates paid to its employees of a different gender for comparable work.” “Comparable work” is not defined by an employee’s job title; rather, “comparable work” is work that requires substantially similar skill, effort, and responsibility, and is performed under similar working conditions. For multistate employers, employees in the same “geographic location” within Massachusetts are to be paid equally for comparable work.  The statute does not define the term “geographic location.”

Employers can rely on one of the six permissible variations in pay for comparable work: (1) a system that rewards seniority with the employer; (2) a merit system; (3) a system which measures earnings by quantity or quality of production, sales, or revenue; (4) the geographic location in which a job is performed; (5) education, training or experience to the extent such factors are reasonably related to the particular job in question; or (6) travel, if the travel is a regular and necessary condition of the particular job.

The State of New Jersey enacted legislation similar to the MEPA.  The Act, prohibits New Jersey employers from paying different salaries to employees based on any protected category, including sex, where the employees are engaged in “substantially similar” work.  Like Massachusetts, the effective date of the New Jersey statute also is July 1, 2018.

The phrase “substantially similar” work is not defined, other than a statement that it is to be viewed as a “composite of skill, effort and responsibility.” An employer in New Jersey may pay a different rate of compensation only if the employer demonstrates that the differential is made pursuant to a seniority system, a merit system, or the employer demonstrates that: (1) the differential is based on one or more legitimate factors other than sex (or any other protected category), such as training, education or experience, or the quantity or quality of production; (2) the factors are not based on, and do not perpetuate a sex-based or other protected-category based differential in compensation; (3) each of the factors is applied reasonably; (4) one or more of the factors account for the entire wage differential; and (5) the factors are job-related with respect to the position in question and based on a legitimate business necessity. A factor based on business necessity shall not apply if it is demonstrated that there are alternative business practices that would serve the same business purpose without producing the wage differential.

Both statutes significantly expand the reach of the concept of equal pay, by broadening the net of jobs used for comparison purposes to “comparable” (MEPA) or “substantially similar” (NJ). Both standards are somewhat vague and will need to be interpreted by the courts.  Employers in Massachusetts and New Jersey will have to evaluate their pay  structures carefully to comply with the law and to assess risks of actions under these statutes.

When MEPA becomes effective, employers with employees in Massachusetts not only will be unable to justify pay differential based on salary history, but also will not be permitted to ask for an applicant’s salary history prior to an employment offer, or seek such information through a recruiter. By contrast, the New Jersey ban on salary history questions, which was put in place by Executive Order effective February 1, 2018, applies only to employer that are state agencies.

Employers who violate either the Massachusetts or New Jersey laws will be liable for back pay and liquidated damages.

Rebecca Alperin and Tracey E. Diamond

 

 

 

 

Philadelphia Employers May Not Ask Wage History Questions Under New Ordinance

Q.  My company is based in Philadelphia.  We often set salaries for new employees based on the applicant’s wage history.  Are we still permitted to do this?

A.  Effective May 23, 2017, a new Philadelphia Ordinance makes it unlawful for employers in Philadelphia to inquire about a prospective employee’s wage history or require disclosure of wage history as a condition of employment.  The law was passed to encourage employers to base salary offers on the job responsibilities of the position sought, rather than on the applicant’s prior wages.  Employers will no longer be able to rely on the wage history of a prospective employee when determining the wages of that individual, unless the individual knowingly and willingly disclosed his or her wage history to the employer.

To ensure compliance with the Ordinance, employers who do business in Philadelphia should start thinking about revising their employment applications to delete any questions inquiring about an applicant’s wage history.  Recruiters, HR personnel and managers will need to be trained about the new law so that these individuals know not to ask wage-based questions during the interview process.  In addition, employers should consider revising their EEO policies to add wage history to the list of protected categories.

-Tracey E. Diamond