When Philadelphia's new Wage Equity Law takes effect May 23, employers had better be ready to comply.
This January, Mayor Jim Kenney signed a bill banning employers from asking job applicants about their salary history, the outcome of which proponents hope will close the gender pay gap by reducing wage discrimination. Data from the U.S. Census Bureau shows that women make 79 cents for every dollar earned by men.
“The thinking is, if past salary is the basis for the employee’s new salary, then you’re perpetuating the inequity because you’ll always be basing it on what is, in many cases, an unfair comparison,” said Democratic City Councilman Bill Greenlee, who sponsored the bill.
Inspired by a similar move in Massachusetts, the law makes Philadelphia the first U.S. city to prohibit employers from asking the question. Similar legislation is picking up elsewhere. New York Mayor Bill de Blasio, for example, signed an executive order last year making it illegal for city agencies to ask the question during the hiring process.
Lawbreakers in Philly will be subject to review by the Philadelphia Commission on Human Relations, and potentially be ordered to pay a $2,000 fine, as well as damages.
But unless they’re deliberately trying to skirt the law, Greenlee said compliance shouldn’t be hard.
“It’s a fairly simple issue: You can’t ask that one question,” he said.
John Lee, a law partner at Morgan Lewis, said it’s slightly more involved than that. He recommends employers start preparing for the law by reviewing all of their application rules—both paper and online. They should also search their policies and procedures for interview guidelines that recruiters or managers might use when hiring, so that any salary inquiries are removed from the materials.
“They should additionally provide training to recruiters and managers so that they understand that they can no longer ask or rely upon the question when making initial pay decisions,” Lee said.
Hosea Harvey—an associate professor of law at Temple University—said that employers using outside help would need to do some additional work.
“Many employers use third parties to do reference checks, and will now have to interface with them to ensure they are compliant,” Harvey said, adding that the same logic applies to companies that used job boards.
Unintended city-wide consequences
Harvey, who researches the role laws play in minimizing the effects of race and gender disparities in business, believes this law could possibly backfire by shifting initial offer salaries downward across a host of job categories in Philly.
If an employer can’t use market responses from potential employees as an appropriate salary gauge, for example, that employer might decide that the most effective way to save money in the market is by starting too low, Harvey said. And while higher-level applicants that apply may know they’ll be able to negotiate upwards, lower-level employees that apply will probably accept the low-ball offer because it’s still higher than what they’re currently making.
And that’s another part of this equation that complicates matters further: Negotiation troubles.
“Research makes it abundantly clear that people of color and women are sorely disadvantaged in the negotiation process,” Harvey said.
Lawmakers elsewhere aren’t unaware of this problem. To help close its own gender wage gap, Boston offered negotiation classes to every woman working in the city. On a national level, a proposed law called the “Paycheck Fairness Act” included “negotiation skills training for girls and women” as one way to help close the gender pay gap.
Then again, studies suggests that when compared to men, employers react more negatively to women who ask for more money. If that’s true, and the law does end up lowering the initial salaries offered to women in certain jobs, women will be stuck in a difficult place.
“As a man of color who is deeply sympathetic to this, it’s not clear to me that this is the space in which to apply traditional anti-discrimination tools,” Harvey said.
The law may also have some potential loopholes.
The law, for example, allows for job seekers to “knowingly and willingly” disclose their salary history, but doesn’t explain what that means.
“For example, the wages of state employees in Florida are public—they’re posted on the web. So if that was your previous position, does that mean you’ve knowingly and willingly disclosed your salary history?”
Harvey isn’t the only one questioning the law.
The Chamber of Commerce for Greater Philadelphia posted a note on its website in January decrying the law, saying it would “not result in wage equity. Nor does it provide any evidence to suggest that removing this question from the hiring process results in wage equity.”
The Chamber also argued that the law makes Philly a less desirable place to do business.
“I just don’t see where paying someone fairly is anti-business,” he said. “To me, that doesn’t make sense.”
Others are pleased with the law, but believe it’s part of a larger puzzle of issues that could help close the pay gap. Michele Hamilton, president of the Pennsylvania National Organization for Women — a state chapter of the nonprofit National Organization for Women — is in this camp.
“Wage secrecy on the job is another reason we have such a discrepancy in pay; women and people of color often don’t know they are getting paid less for comparable work,” Hamilton said. “Ending that secrecy could help make people aware of that, and potentially do something about it.”
For now, Philadelphians have the Wage Equity Law. And starting May 23, only time will tell how it shakes out.