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National eyes are on Philadelphia pay-equity case

In 1963 the Equal Pay Act was passed with the noble intention of eliminating pay inequality by making it illegal to pay men and women unequally for equal work. Although an initial step in the right direction, over 50 years have passed, and America still struggles with a gender pay gap.

According to a study done by the National Women’s Law Center, women still earn on average $0.17 less per dollar than their male counterparts. This gap grows if the women are mothers to about $0.29 per dollar, and the Institute for Women’s Policy Research places the disparity in an abysmal range of $0.37 to $0.46 per dollar if the woman is a minority. It is clear that the Equal Pay Act has failed to achieve its goal.

One of the most often-cited reasons for its failure is a loophole found in the text of the Equal Pay Act itself. The Act outlaws paying unequal wages for equal work except in four circumstances, which may be raised by the employer as affirmative defenses. Employers may pay unequal wages for equal work when there is (1) a bona fide seniority system, (2) a bona fide merit system, (3) a system measuring earnings by quantity or quality of production, or (4) any other factor other than sex. It is the last exception, “any other factor other than sex,” which is being exploited as a pretext for gender wage discrimination.

Employers claim that using salary history to craft offers to potential new hires is one of these allowable “other than sex” factors, and some courts have upheld that reasoning. Other courts have decided that salary-history-based offers fall squarely into the type of discrimination the Equal Pay Act was meant to prevent. Americans are becoming increasingly aware, however, that using salary history to craft offers is problematic if women are currently being paid less than their male counterparts for the same work, in which case a future wage based on previous underpayment serves to perpetuate the gender pay gap.

A bill to address the issue waits for U.S. Senate approval after having passed the House for the second time since its first iteration in 1997m when Rep. Rosa DeLauro (D) introduced it. As Congress considers the bill, dubbed the Paycheck Fairness Act, and as circuit courts remain split on whether salary history is “any other factor other than sex,” states and cities are taking action. They are enacting legislation to ban questions about applicants’ salary histories, thereby narrowing the loophole exception in the Equal Pay Act.

There are presently 16 statewide bans on using salary history in the hiring process and 13 local bans. Philadelphia instituted one of the local bans, with a law prohibiting employers from asking job applicants to disclose their salary histories or from relying on salary history to set wages if the applicant voluntarily provides the information. Philadelphia’s Chamber of Commerce has challenged the ban, and the case has made its way up to the Third Circuit Court of Appeals. Argued on March 15, the parties await a decision.

Other cities and states around the rest of the country are awaiting the decision, as well, to see how a challenge on their own salary history bans, proposed or enacted, might play out.

Pennsylvania suddenly has a substantial voice in the recent nationwide discussions of gender pay inequality.

These states and cities sometimes expressly cite Equal Pay Act inadequacies in the purpose clauses of their salary-history bans, recognizing the need for action.

A few states cannot achieve nationwide equality on their own, however, and with such a variety of interpretations of the Equal Pay Act loophole, the time is ripe for either a Supreme Court decision or Congressional action to clarify the matter.

In the wake of the #MeToo movement, the gender-pay equality effort has gained awareness and momentum. Regardless of how the Third Circuit decides Philadelphia’s ban, congressional action is being urged by a number of advocacy groups, including the American Bar Association.

Despite the overwhelming statistics, there is still pushback against these salary history bans. Some claim that businesses will be hurt by the initiative. Others say that it will lead to lowball offers for both genders for want of a reference point. Until the Supreme Court or Congress has spoken, however, all eyes are on Philadelphia.

Thea A. Paolini is an attorney in the business and employment practice group of Nauman Smith, a law firm in Harrisburg. She also has an MBA and was a business owner before pursuing a legal career.

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