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Viewpoint: Would Delaware’s compensation history law survive judicial review?

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Timothy M. Holly
partner in Connolly Gallagher LLP

Delaware’s General Assembly has a knack for passing legislation on the hot topic of the day – sometimes placing more value on being first than carefully deliberating the law. This can result in statutes that are vulnerable to judicial scrutiny. The Delaware Compensation History Law (19 Del. C. § 709B), passed on June 14, 2017, may be the latest example of this.

While the Delaware law remains unchallenged, the U.S. District Court for the Eastern District of Pennsylvania recently held much of a similar Philadelphia ordinance to be in violation of the First Amendment.

The Delaware Compensation History Law applies to employers and employers’ agents (thus creating individual liability). The law prohibits seeking or requesting an applicant’s compensation history. It’s also a strict liability law, which means the reasons for asking prohibited questions do not matter.

Although the bill underwent significant changes, the Delaware State Chamber of Commerce maintained that the law went too far in restricting the free speech rights of businesses. As many critics of the bill argued, governments should tread very lightly when trespassing on free speech rights, and they should first develop a record that it can survive the rigor of constitutional analysis.

The Delaware Compensation History Law appears to be the first of its kind. Massachusetts passed a similar law, but Delaware’s became effective first. Being first, however, might not make Delaware best.

The Court noted that the existence of a Philadelphia “gender pay disparity” was not really disputed. But the Court also noted that employers might want to ask about compensation history for any number of legitimate reasons ““ including reasons having nothing to do with pay disparity, and even reasons other than in setting compensation rates (e.g., in determining whether the employer can afford the applicant, which the Court seemed to accept as proper). Of course, Delaware’s Compensation History Law, in addition to prohibiting seeking compensation history, prohibits the screening of applicants based on compensation history. Regardless, the Court noted that the existence of a wage history is not in and of itself illegal ““ meaning that asking about such is not inherently suspect.

Ultimately, the court was not persuaded that those (in Philadelphia) voting to take away the speech rights of businesses relied upon sufficient evidence to conclude that discrimination is the cause of the wage gap, and that a ban on requesting wage history would alleviate that gap.

The Philadelphia City Council heard from at least eight witnesses, including six professionals with some impressive credentials and certainly good sound bites. The court, however, found that much of the evidence came from unsubstantiated conclusions, mostly conjectural in nature. Although perhaps logical or even “common sense,” the court noted that, “more is needed” than “various tidbits” and “educated guesses” when it comes to free speech rights. As the court noted and Philadelphia’s own witness corroborated, “disparate wages could also be based on factors having nothing to do with discrimination, such as qualifications, experience, or any number of other factors.”

Notably, the evidence considered in Philadelphia appears to be far more (both in terms of quantity and quality) than the Delaware General Assembly considered. Since the evidence in the Philadelphia Wage Case was found to fail the “substantial evidence” test, it is reasonable to question whether the Delaware Compensation History Law would survive judicial scrutiny.

In the wake of the ruling on the Philadelphia ordinance, Delaware’s General Assembly might want to revisit the Compensation History Law before the issue enters a courtroom. Then again, perhaps the Compensation History Law will be defended successfully. Maybe it will not even be challenged. Perhaps the federal court decision for the Philadelphia case will be overturned. Time will likely tell.

As the Philadelphia Wage Case illustrates, well-intended laws can be made unlawful as a result of interference with constitutional rights.

Timothy M. Holly is a partner in Connolly Gallagher LLP who focuses his labor and employment law practice on diverse areas of law impacting human resources. 

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