With July 1 Just Around the Corner, Employers Must Be Ready
The New Pay-equity Law
By John S. Gannon, Esq. and Amelia J. Holstrom, Esq.
This summer, Massachusetts will enact what many believe to be the most stringent pay-equity legislation in the country.
Back in August 2016, Gov. Charlie Baker signed “An Act to Establish Pay Equity,” which amends the state’s existing equal-pay law and goes into effect on July 1, 2018. The intent of the legislation is laudable; it is aimed at strengthening pay equity between men and women in the Commonwealth.
Studies show that, despite more than 50 years of pay-equity laws being on the books, a significant wage gap between men and women still exists. In order to try and narrow that gap, the new Massachusetts pay-equity law imposes rigorous equal-pay obligations on employers. The new law also prohibits certain pay-related conduct by employers, including asking applicants about past compensation.
With July 1 just around the corner, employers need to take a careful look at the law, its requirements, and what they should be doing right now to limit their legal liability.
What Is Comparable Work?
Employers have been prohibited from discriminating in the payment of wages between men and women who perform comparable work for decades. The current version of the law, however, does not define what ‘comparable’ means. As a result, the Massachusetts courts defined ‘comparable’ in a way that made it very difficult for employees to succeed on a pay-discrimination claim.
Specifically, the employee had to establish that the jobs “did not differ in content” and entailed “comparable skill, effort, responsibility, and working conditions.” Many employers were successful defending pay-equity claims by showing that jobs “did not differ in content.”
The new pay-equity law defines ‘comparable work’ in a way that eliminates this “differ in content” requirement. This means that jobs may now be comparable for pay-equity purposes even though the job duties are different. The new law defines comparable jobs as those that involve “substantially similar skill, effort, and responsibility” and are performed under “similar working conditions.”
This language is broader than the test previously set forth by the courts, so it will likely lead to more favorable results for employees who file lawsuits under the amended act.
What If Employees in Comparable Jobs Are Paid Different Wages?
Some pay differences are permitted under the amended act, but they are very limited. Pay differences between persons performing comparable work are only acceptable if based upon: (1) a seniority system; (2) a merit system; (3) a per-unit or sales-compensation scheme; (4) geographic location of the job; (5) education, training, and experience, or; (6) the amount of travel required.
However, because the statute does not define these terms, employers have little guidance on how they might be interpreted and applied.
Employers who need to correct pay disparities may not reduce the salary of an employee in order to comply with the new law. Employers who have unexcused pay differentials will need to ‘level up’ and bring the pay of the lower earners up to the pay of the highest earner doing ‘comparable work.’
From Pay Equity to Pay Transparency
The amended act also prohibits employers from engaging in a common pay-related practice. Starting July 1, employers may not ask job applicants about their salary or wage history. Employers similarly cannot seek an applicant’s pay-history information from a current or prior employer.
As a result, employers must remove all questions regarding previous salary and wage-history information from their applications and train hiring managers not to ask prohibited questions.
Defense for Those Who Evaluate Pay Practices
There is one silver lining for employers. The new law provides an affirmative defense to employers who complete a “good-faith” self-evaluation of their pay practices and demonstrate “reasonable progress” toward eliminating any wage differentials.
This means employers who adequately audit their pay practices may avoid liability under the new law, but only if the employer’s self-evaluation is “reasonable in detail and scope in light of the size of the employer.”
Businesses should take advantage of this defense by formally auditing their pay practices before July 1, 2018, to ensure compliance with the new law. Employers who conduct an audit with an attorney can assert the attorney-client privilege with regard to all or some of the audit, which would protect it from disclosure during a lawsuit if the employer so desires.
With July 1 roughly four months away, employers need to begin making necessary changes to comply with the statute and strongly consider performing an audit to identify and address any already existing pay disparities. Attorneys may be eager to assert these claims due to the relaxed definition of comparable work and the potential for liquidated damages, attorney’s fees, and costs. So businesses need to be ready.
John S. Gannon is an attorney with Skoler, Abbott & Presser, LLC, one of the largest law firms in New England exclusively practicing labor and employment law. He specializes in employment litigation and personnel policies and practices, wage-and-hour compliance, and non-compete and trade-secrets litigation; (413) 737-4753; [email protected] Amelia J. Holstrom joined Skoler, Abbott & Presser in 2012 after serving as a judicial law clerk to the judges of the Connecticut Superior Court, where she assisted with complex matters at all stages of litigation. Her practice is focused in labor law and employment litigation; (413) 737-4753; [email protected]