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Philadelphia will be the first city in the country to ban private-sector employers from asking job applicants about their salary history.
The purpose of the law is to close the wage gap between men and women. Citing a 2015 U.S. Census Bureau report, the wage equity ordinance says that women in Pennsylvania are paid 79 cents for every dollar men are paid and that women of color earn even less.
Mayor Jim Kenney signed the ordinance on Jan. 23, and it will take effect in May.
It will prohibit employers from asking job applicants about their prior salary or requiring disclosure of salary history as a condition of employment. The ordinance will also prohibit businesses from retaliating against prospective hires if they don't disclose such information.
Additionally, if employers somehow come across the information, they can't use it to make salary decisions unless the job applicant knowingly and willingly disclosed it, explained Benjamin Mann, an attorney with Fisher Phillips in Philadelphia.
[SHRM members-only toolkit: Managing Pay Equity]
"It's going to be a sea change for employers of all sizes," said John Lee, an attorney with Morgan Lewis in Philadelphia. Businesses have long relied on applicants' past wages to get a handle on the market value of a particular position and to use that to gauge competitiveness, he added.
Employers can be penalized under the new law if they do ask off-limits salary questions on applications or during interviews, Mann said. "It might be harder than you think to stop asking a question that's been asked for so long," he added.
Mann said Philadelphia employers should make sure that they remove salary-history questions from employment applications and other staffing material and that they train hiring managers and interviewers on the new law.
The wage equity ordinance will become a part of the Philadelphia Fair Practices Ordinance, which is the local law that governs unlawful discrimination, explained Mann. But the fair practices law defines "employer" very broadly, which creates some confusion about how the wage equity ordinance is going to apply to businesses that operate within and outside of Philadelphia, he added.
Employer is defined as: "Any person who does business in the city of Philadelphia through employees or who employs one or more employees exclusive of parents, spouse, life partner or children, including any public agency or authority; any agency, authority or other instrumentality of the commonwealth; and the city, its departments, boards and commissions."
This ambiguous definition doesn't make it clear if the ordinance is limited to employers within the city of Philadelphia, Lee said.
There are a number of permutations that could take place. For example, a business could be hiring for positions nationwide out of a Philadelphia branch or hiring for positions in the city but all of the applicants are outside of the city. It's not clear which employers must follow the new law, he said.
Hopefully the city council or mayor's office will address some of these questions before the law goes into effect in May, Mann said.
Tips for Employers
Employers should look at existing handbooks, policies and practices to make sure they aren't asking about salary history or making decisions based on it, Lee said.
He noted that employers should make sure staffing-agency partners are updating their policies and practices, too, because the law also applies to agency hires.
If prior pay had previously been used to gauge a candidate's skill level, employers should start gathering other relevant data points, such as employer size, Lee added.
"With each passing year there are more and more restrictions being placed on the application and interview process in Philadelphia," Mann said. Employers also have to contend with local paid-sick-leave and ban-the-box laws, as well as restrictions on applicant credit checks.
Multistate employers should note that a Massachusetts ban on salary-history questions will take effect in 2018. Additionally, New York recently prohibited state agencies from asking about prior pay.
Other states—such as California—and large cities also have legislation in the works.
"The reason we are seeing more activity at the state and local level is because the federal government hasn't provided clarity in these areas, and with the new administration, there's not likely to be a lot of movement," Lee said.
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