A federal court in Philadelphia struck down a new city law that barred employers from asking job candidates about their salary history. The ruling has serious ramifications for the fight to narrow the gender wage gap.
Asking applicants how much money they earned at previous jobs has long been a routine part of the hiring process. But this seemingly harmless question is a key culprit in the persistent gender wage gap in the United States, according to a growing number of civil rights groups and legal experts.
Businesses decide what to pay new hires based partly (or entirely) on how much they earned at their last jobs. Because women are generally paid less than their male co-workers, for reasons that include discrimination, asking female job candidates about their past salaries nearly guarantees that the wage disparity will continue throughout their careers. The same dynamic disadvantages workers of color.
This awareness has led equal rights advocates to push state and local lawmakers to address the problem with a straightforward idea: ban companies from asking the question altogether.
Since 2016, at least nine cities and states have passed laws banning employers from asking job candidates about their salary history. In April, the Ninth Circuit Court of Appeals gave momentum to the movement in a major court ruling, saying it’s a violation of the Equal Pay Act for businesses to consider a job candidate’s past wages when crafting a salary offer.
Massachusetts was the first state to outlaw the salary question altogether in August 2016. Since then, California, Oregon, Delaware, and Puerto Rico have done the same. Maryland is considering a similar law. Several local governments, including Albany County, New York City, San Francisco, New Orleans, Philadelphia, and Pittsburgh have passed their own bans, though some of the local laws only ban the question for government jobs.
Businesses aren’t thrilled about this development, and they are starting fight back. In Michigan and Wisconsin, lawmakers recently passed laws prohibiting bans on the salary question.
Last month, the Chamber of Commerce for Greater Philadelphia won the first legal challenge to the salary question restriction. The business group argued that Philadelphia’s wage equity law, which prohibited companies from asking about salary history, violates an employer’s First Amendment rights because it outlaws a question that has a legitimate commercial use to businesses, such as providing data for market research. The federal judge sided with them.
The Philadelphia court’s ruling in favor of businesses could trigger more legal battles over the bans, and potentially put the brakes on a policy trend that has the potential to help narrow the pay gap that leaves female workers and people of color behind. Extensive research has shown that many factors contribute to the gender pay gap, but about 62 percent of the difference remains unexplained and is likely associated with discrimination and bias toward women in the workplace. No research exists on whether the salary question causes or contributes to the wage gap, but policy experts believe it keeps it in place, by allowing past pay discrimination to follow women from one job to the next.
The First Amendment argument is a strong defense for companies
When the Philadelphia City Council first proposed an ordinance to ban the salary question in 2016, it didn’t seem controversial. It wasn’t until the law passed in 2017 — and Mayor Jim Kenney was prepared to sign it — that Comcast, a Philadelphia-based company, threatened to sue the city if the mayor didn’t veto.
The mayor signed it anyway.
A few months later, the Chamber of Commerce sued the city in federal court on behalf of Comcast and other local businesses, saying that the law is unconstitutional and that the organization wanted “to stand up for the economic rights and the free speech rights the First Amendment guarantees.”
US District Judge Mitchell Goldberg agreed with the organization’s argument, based on his application of what’s called the Central Hudson Test, which guides judges in deciding whether a law unfairly restricts protected commercial speech.
The Philadelphia law had to overcome three hurdles. First, is the law banning commercial speech — in this instance, the salary history question — related to illegal or misleading activity? The judge said no, reasoning that businesses have legitimate reasons to inquire about past salaries, including for market research.
Second, does the government have a substantial interest in regulating this speech, and does the regulation directly advance that interest? The judge said yes — the city’s interest in closing the gender wage gap is a legitimate one, and eliminating the salary question would probably advance that.
The third question was critical: Is the law narrowly tailored to advance the goal, so that it does not restrict speech that is protected? The judge said no, because it restricts businesses from collecting salary information for purposes that do not violate gender discrimination laws.
“I conclude that the City’s [salary question ban] violates the First Amendment,” Justice Goldberg wrote in his April 30 opinion. “Although the Ordinance represents a significant positive attempt to address the wage gap, the First Amendment compels me to enjoin implementation of the [salary question ban].”
The judge ruled that the city could let part of the law stay in place — the section that prohibits companies from using salary history alone to determine a new hire’s wages — but the city cannot stop a company from asking job candidates about their salary history.
The ruling suggests there could be legal problems ahead for the states and cities that are considering similar bans.
Women have made slow progress toward reaching equal pay with men
You’ve probably heard this statistic: Women who work full time earn, on average, 82 cents for every dollar a man earns — a number that has hardly budged since 2004, according to the Bureau of Labor Statistics. (The disparity is even larger between women of color and white men.)
Researchers have found many reasons to explain the gap: Women are less likely to negotiate pay, they face gender discrimination from supervisors, and they are often pushed out of the highest-paying professions in the country, which reward workers who put in long hours — schedules that disproportionately hurt working mothers.
A 2013 study by the American Association of University Women found that women get paid 6.6 percent less than men in their first jobs, even after considering factors such as job location, occupation, college major, and number of hours worked.
It’s not hard to see the challenge in closing that gap when employers largely rely on a person’s past salary to calculate their new salary.
“What we know is when women — and particularly women and men of color — get hired, people are more likely to underpay them,” Victoria Budson, executive director of the Women and Public Policy Program at Harvard University’s Kennedy School, told Slate. “And when you peg your offer and salary based on what someone made in their last employment, you then replicate whatever discrimination people have faced in prior jobs.”
That’s why equal pay advocates have zeroed in on the salary question.
Hollywood and Silicon Valley shined the spotlight on the gender pay gap
The fact that women make less than men in similar jobs is nothing new. But recent stories out of Hollywood and Silicon Valley have renewed attention to the issue.
Jennifer Lawrence and Amy Adams reportedly got only a 7 percent cut of profits from the movie American Hustle, compared to the 9 percent deal for their male co-stars. More recently, Michelle Williams was reportedly paid eight times less than her co-star Mark Wahlberg to reshoot the same number of scenes for the film All the Money in the World.
Silicon Valley’s most celebrated companies are also facing scrutiny for allegedly paying women less.
Four women who worked at Google are suing the company for violating equal pay laws, arguing that the company paid women less than men for the same work, assigned them to lower-paying jobs, and promoted them less often.
Google denies those allegations, but the Labor Department’s findings seem to support the women’s claims. Auditors for DOL said they found “systemic compensation disparities against women” across the entire company. The agency is investigating the company’s pay practices as part of a routine pay audit it performs on federal contractors.
In Google’s case, part of the pay disparities could be related to salary histories. Two Labor Department investigators reportedly told a DOL administrative law judge in April that Google officials admitted to using a job candidate’s past salary to determine a job offer, by offering them about 20 percent more. Google later said that a candidate’s past salary is only one factor used to determine a salary offer.
The recent Ninth Circuit ruling bars businesses from considering salary information in any way
In April, an 11-judge panel for the Ninth Circuit Court of Appeals ruled that employers can’t use a woman’s salary history to rationalize paying her less than a man doing the same job.
The appeals court overturned a ruling made last year by three appellate judges, who had sided with a lower court in deciding that it wasn’t a form of gender discrimination for the Fresno school district to pay a female math consultant less than a male peer. The lower court had ruled in Rizo v. Yovino that the school district’s decision to pay Aileen Rizo less was based on the fact that she was paid less in previous jobs, not because she was a woman.
But a panel of judges said that calculating a woman’s pay based on her salary history is a form of gender discrimination — a violation of the Equal Pay Act of 1963, which prohibits businesses from paying women less than men for the same work.
The Ninth Circuit’s decision could have far-reaching consequences. The ruling would make it a lot harder for employers in the region — which includes Silicon Valley — to persuade a federal judge to dismiss gender pay discrimination lawsuits.
That’s because federal judges in the Ninth Circuit now need to reinterpret the Equal Pay Act. The law bars businesses from paying men and women different wages, but there are exceptions: A man could be paid more because of seniority, experience, or work performance. The law also says employers could pay different wages if the decision was “based on any other factor than sex.”
That last exception is at the heart of this legal battle. For more than three decades, the Ninth Circuit — and most federal courts — have viewed salary history as a factor “other than sex,” and therefore held that it was not illegal for businesses to pay a woman less than a man just because she earned less in previous jobs. That view has been the norm in the Ninth Circuit region since the court’s 1982 ruling in Kouba v. Allstate Insurance Company.
In that case, an Allstate agent in Sacramento and her female colleagues sued the company for allegedly discriminating against women by basing their wages on their last salary. Lola Kouba claimed she was paid about $800 a month compared to $1,000 a month earned by male colleagues doing the same job.
But the Ninth Circuit disagreed with Kouba’s discrimination argument, saying it was not illegal to pay a woman less than a man based on her past salary if the employer had “an acceptable business reason” to do so. Allstate argued that it did so to save money; the appellate court considered that a legitimate business decision.
Rizo v. Yovino sets a new precedent, at least in the Ninth Circuit. But as the Philadelphia lawsuit and ruling show, the battle against the use of salary history to determine pay is hardly over.