The new law, the “Act to Establish Pay Equity,” was signed by Governor Charlie Baker on August 1, 2016. It replaces Massachusetts’ existing pay equity law, M.G.L. ch. 149 § 150A, in an effort to eliminate the gender pay gap by broadening the meaning of “comparable work” and implementing new rules on employees’ salaries. The new act also creates an affirmative defense for employers who conduct a self-evaluation of their pay practices. The law will not take effect until July 1, 2018, giving employers time to evaluate their policies.
The new law defines “comparable work” as “work that is substantially similar in that it requires substantially similar skill, effort, and responsibility and is performed under similar working conditions.” The old pay equity law interpreted comparable work as being “of comparable content” as well as substantially similar skill, effort, and responsibility. This will presumably broaden the definition and offer more protection to employees by creating more situations where two positions can be considered comparable work.
The new law also contains a list of reasons for pay disparity that is not prohibited; a difference in pay will not be prohibited if it is based on: “(i) a system that rewards seniority with the employer; provided, however, that time spent on leave due to a pregnancy-related condition and protected parental, family and medical leave, shall not reduce seniority; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production, sales, or revenue; (iv) the geographic location in which a job is performed; (v) education, training or experience to the extent such factors are reasonably related to the particular job in question; or (vi) travel, if the travel is a regular and necessary condition of the particular job.”
Other than broadening the definitions of the previous pay equity statute, the Massachusetts Act to Establish Pay Equity will add new prohibitions that aim to further close the pay gap. First, the Act makes it unlawful for employers to require, as a condition of employment, that employees refrain from inquiring about or discussing their own wages, or the wages of a fellow employee. With that said, the law does not create an obligation for an employer to disclose an employee’s wages to another employee.
Second, the statute makes it unlawful for an employer to seek wage or salary history from a prospective employee or their current/former employer. A prospective employee may voluntarily provide their salary history, and the prospective employer may contact the current or former employer to confirm that information. A prospective employer may also seek out salary history after an offer of employment with compensation has been negotiated and made to the prospective employee.
Third, an employer may not discharge or retaliate against an employee for opposing an act made unlawful by the statute, bringing a complaint, or engaging in any other protected conduct. Finally, the statute states that an employer cannot lower the wage of one employee to comply with the law.
The new act creates an affirmative defense for employers who have completed a self-evaluation of their pay practices and have made “reasonable progress” towards closing pay disparities based on gender. The affirmative defense will also be applicable to any pay discrimination claims arising under section 4 of MGL chapter 151B. The statute is vague in what it considers a valid self-evaluation, stating that it may be of the “employer’s own design, so long as it is reasonable in detail and scope in light of the size of the employer.” A self-evaluation may not be used as an affirmative defense if it is not reasonable in detail and scope, even if the employer has shown that they have made progress toward remedying pay disparity. With that said, even if the employer is not availed of the affirmative defense, they will not be liable for liquidated damages so long as the good-faith evaluation was completed within three years prior to an alleged complaint.
The statute also states that evidence of a self-evaluation or any steps taken by an employer in accordance with the law is not admissible as evidence of a violation if alleged violation occurred before the self-evaluation or occurred either (1) six months after the self-evaluation or (2) within two years of the self-evaluation if the employer can show that they have developed/implemented a plan to address the pay differentials based on gender. No negative inference can be made against an employer for not conducting a self-evaluation. The statute also notes that an employer may not enter agreements with their employees to avoid compliance or make themselves exempt from claims under this law.
An employee may bring a claim against their employer either individually or as a class action suit; the Attorney General may also bring an action against an employer for unpaid wages, liquidated damages, court costs, and attorney’s fees. Plaintiffs are not required to file a claim with the Massachusetts Commission Against Discrimination before filing in court, as they are with any claims arising under ch. 151B.
An employee must bring a claim within three years of the alleged violation. The statute clarifies this by stating “a violation occurs when a discriminatory compensation decision or other practice is adopted when an employee becomes subject to a discriminatory compensation decision or other practice or when an employee is affected by the application of a discriminatory compensation decision or practice.” This means that the statute of limitations will reset every time an employee who has a potential claim receives a paycheck.
EMPLOYER ROADMAP FOR COMPLIANCE
The first step toward compliance for any employer should be determining whether to conduct a self-evaluation of pay practices. While the new pay equity statute provides an affirmative defense to claims, the defense currently only exists under state claims, not federal claims. The Massachusetts law states that no negative inference shall come from an evaluation, but there is no way to tell, at this point, whether the same will go for any federal pay equity claims that may arise.
Other than an official self-evaluation of pay practices, employers should focus on the new law’s prohibitions and make sure their practices are in line with the new rules. Most importantly, employers should look at their hiring practices to determine whether there are any questions about pay history contained in the initial application process. Employers should also think about possibly updating their employee handbooks to make sure their policies regarding employees discussing compensation comply with the new law.
Employers should also consider training any management about the new law’s prohibitions, especially if management oversees compensation decisions.
Although the Attorney General has not provided any guidance on exactly how to conduct a self-evaluation of pay practices, it is important to remember that it must be reasonable in detail and scope, which will presumably be different for every employer. Larger sized employers may also want to think about hiring a labor statistician or another qualified data analyst to conduct the evaluation; you will want someone who is familiar with the concept of pay equity and the best ways to identify pay disparity. The main goals of these self-evaluations should be to determine if there are any pay differentials among employees of different genders, determine whether the reasons for those pay differentials are prohibited under the new pay equity statute, and to identify the root causes of the differentials in order to implement internal policies to stop them.
For an in-depth self-evaluation, an employer should consider all aspects of their pay decisions. There are factors that go into all pay decisions, such as starting pay, merit-based pay increases, and promotional pay increases. The self-evaluation should consider every factor used in the salary decision-making process to determine what the driving forces for each decision have been in the past.
Depending on the results of the data analysis, there are certain corrective actions that may help remedy pay equity moving forward. These may include reducing managerial discretion, providing an in-depth written record of salary decisions, and using lump-sum bonuses instead of annual merit-based salary increases (but it is important to remember that recommended corrective actions will be based on an employer’s individual self-evaluation).