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On April 30, 2018, a Philadelphia federal judge issued an opinion striking down a portion of Philadelphia’s salary history ban. Salary history bans have become increasingly common tools used by various cities and states around the country attempting to combat wage disparities that exist across genders, races, and ethnicities.  The Philadelphia law consists of two parts: (i) an inquiry provision, which addresses employers asking candidates about their salary history; and (ii) a reliance provision, which makes it illegal for companies to rely on salary history in making hiring decisions. The law, like many others around the country, provides punitive penalties for employers who violate the law, and harsher penalties for repeat offenders.

Judge Goldberg’s ruling struck down the inquiry provision on First Amendment grounds, but upheld the reliance provision. As a result, employers face an interesting dilemma.  Philadelphia employers are permitted to ask about an applicant’s salary history, but they are prohibited from relying on that information when determining wages or offering employment.

Even though the decision struck down part of the law, it may still be prudent for Philadelphia employers to refrain from asking applicants about their salary history. Any employer that asks candidates about their prior salary history during the hiring process might have a more difficult time proving that (i) it did not consider the salary history information during the hiring process, and (ii) any wage disparity that exists between protected classes was the result of permissible reasons, not due to past salary information.

Although this decision only affects Philadelphia employers, as more of these laws become enacted across the country, more will face challenges in court. Many of the decisions will turn on different factors, but other judges may look to Judge Goldberg’s ruling for guidance.  We’ll be sure to keep you up to date on the legal trends of the salary history bans, as well as any appeal that may result from this immediate decision.

Everyone knows that employers covered by the Age Discrimination in Employment Act (ADEA) cannot intentionally refuse to hire job applicants because they are 40 years old or older, and that it is generally unlawful to post a job advertisement that says “people over the age of 40 need not apply.” Such practices constitute impermissible “disparate treatment” under the statute.  But what about age-neutral hiring practices that may have a “disparate impact” on older applicants, such as posting advertisements for candidates with only “one to three years of experience,” or recruiting for entry-level professional positions exclusively on university campuses?  These and other common practices may also be unlawful, according to a recent decision by the U.S. Court of Appeals for the Seventh Circuit.

The Supreme Court held in Smith v. City of Jackson, 544 U.S. 228 (2005), that the ADEA prohibits employment practices that have a disparate impact on existing employees, unless the employer can prove that the practice is based on a “reasonable factor other than age.”  But whether the ADEA similarly protects job applicants from disparate impact remains unsettled.  The ADEA’s disparate impact provision (29 U.S.C. § 623(a)(2)) refers to “employees,” unlike the statute’s disparate treatment provision (29 U.S.C. § 623(a)(1)), which refers more broadly to “individuals.”  This difference led the Eleventh Circuit, sitting en banc, to conclude in Villareal v. R.J. Reynolds Tobacco Co., 839 F.3d 958 (11th Cir. 2016) (en banc), cert. denied, 137 S. Ct. 2292 (2017), that age-neutral recruiting practices that merely disparately impact older applicants do not violate the ADEA.

Parsing the statutory language differently, the Seventh Circuit on April 26, 2018, became the first federal court of appeals to hold that job applicants can, in fact, bring disparate impact claims under the ADEA. In Kleber v. CareFusion Corp., No. 17-1206 (7th Cir. Apr. 26, 2018), a divided panel reinstated the claim of a 58-year-old attorney with extensive experience who applied and was not selected for an in-house job advertised as requiring “3 to 7 years (no more than 7 years) of relevant legal experience.”

The Seventh Circuit’s ruling is potentially far-reaching, since other common hiring practices, including internship programs for recent graduates, and recruiting at colleges and universities, also have a tendency to disadvantage older workers. Whether these practices, or “experience caps” such as the one at issue in Kleber, can be justified by a “reasonable factor other than age” (RFOA) remains to be seen.  Under the EEOC’s regulations, the RFOA defense requires proof that a practice is “both reasonably designed to further or achieve a legitimate business purpose and administered in a way that reasonably achieves that purpose,” in light of all the circumstances, including the potential harm to older workers. 29 C.F.R. § 1625.7(e).

Kleber generated a lengthy majority opinion as well as a dissent, and CareFusion has petitioned the full Seventh Circuit for en banc review. Villareal produced no less than four separate opinions at the en banc stage.  Although the Supreme Court denied certiorari in Villareal, the circuit split created by Kleber, if it persists, makes it more likely that the Court will take up the question of disparate impact protections for older applicants under the ADEA in the future.

Kleber applies only within the Seventh Circuit (Illinois, Indiana, and Wisconsin).  However, one California district court has also held that job applicants can bring  disparate impact claims under the ADEA, see Rabin v. PricewaterhouseCoopers LLP, 236 F. Supp. 3d 1126 (N.D. Cal. 2017), and  the Equal Employment Opportunity Commission (EEOC), which has nationwide jurisdiction, has taken the same position.  Employers throughout the country should therefore examine their hiring practices to determine whether practices that tend to disadvantage older workers are supported by a legitimate business purpose and are otherwise reasonable.