Pay Equity Developments in the Mid-Atlantic

The past month has brought notable pay equity developments to the Mid-Atlantic, including pending legislation in Maryland, and a Third Circuit decision that might have far-reaching effects beyond the Philadelphia salary history ban that it upheld.

Maryland’s legislature is currently considering a salary history ban that has been cross-filed in the state Senate and House (Senate version here, with identical House version here). Like many other legislative bans already in effect, the Maryland bill would prohibit an employer from seeking or relying on an applicant’s wage history or retaliating against anyone for refusing to provide their wage history. The bill would also require employers to provide the wage range for a position upon request, and would prohibit retaliation against anyone who makes a request for such wage range. If an employee voluntarily provides their wage history without prompting, an employer could contact the employee’s current employer to confirm that wage history. Further, the employer could also rely on that wage history to support a higher wage offer than initially offered so long as the higher wage would not create an unlawful pay differential. The bill does not address whether an employer could offer a lower wage after the employer’s confirmation. The bill received a favorable recommendation from the Senate Finance committee last week, and remains pending in both chambers.

The U.S. Court of Appeals for the Third Circuit weighed in on the long-running saga arising out of the salary history ban enacted by the City of Philadelphia in 2017, which was initially set to go into effect that year. The measure banned both asking an applicant about prior salary and an employer relying on salary history to set pay. The Greater Philadelphia Chamber of Commerce filed suit against the City of Philadelphia (the “City”) alleging that the two provisions infringed on the freedom of speech of the Chamber and its members. The district court held that the prohibition against relying on salary history was not subject to First Amendment scrutiny because it did not “implicate the spoken or written word.” However, it issued a preliminary injunction against the salary history inquiry provision on the basis that it was an impermissible ban on chamber members’ free speech rights. The Third Circuit held that latter ruling was in error, noting that the district court evaluated the City’s reasoning for the salary ban using the wrong standard. Despite claiming to apply an intermediate scrutiny test under the First Amendment, the district court applied a standard more akin to strict scrutiny by requiring that the City establish that it had “achieve[d] legislative certainty or produce[d] empirical proof” that the salary ban would meet the City interest in closing the gender wage gap. The Third Circuit emphasized that such exacting proof was not required under the applicable intermediate scrutiny test applicable to restrictions on commercial speech, and that instead, the City only needed to show that it had “drawn reasonable inferences based on substantial evidence” that the City had sufficiently demonstrated that that the provision advanced its interest in a direct and material way. The Third Circuit thus vacated the district court’s grant of a preliminary injunction, and ordered the district court to instead issue a denial of the injunction. Although the district court has not yet formally issued such a denial, the ruling vacating the injunction had the immediate effect of reinstating the salary history ban. The case will likely have ripple effects for municipalities and states that were watching the case and have enacted—or are considering enacting—similar bans. For now, however, the lawsuit technically remains pending, and we will continue to watch and report on any developments.