On July 23, 2016, the Massachusetts Legislature passed the Act to Establish Pay Equity (the “Act”).¹ The stated purpose of the Act is to increase wage transparency and bridge the gender gap with regard to wages. Governor Baker stated that he intends to sign the Act next week. If he does so, the Act will take effect on January 1, 2018. When it takes effect, Massachusetts will have one of the most expansive equal pay laws in the Nation. In addition, by limiting the amount of wage-related information employers may obtain from job applicants, the Act may force employers to revise their job applications to eliminate requests for applicants’ pay history.

History of Equal Pay in Massachusetts

In 1945, Massachusetts became the first state to enact a law requiring equal pay for comparable work performed by men and women. The law, however, was rarely used or enforced. This was due, in part, to the fact that the term “comparable work” had been defined narrowly: in order to be “comparable,” two jobs had to have similar duties and require comparable skill, effort, responsibility, and working conditions. Indeed, despite the existence of this law, studies have found that a pay gap between the sexes persists. The stated purpose of the Act is to eliminate this gap.

Requirements Under The New Law

The Act makes it generally illegal for an employer to pay employees compensation at a lower rate than the rate paid to employees of a different gender for comparable work. The law eliminates the requirement that “comparable work” involve similar duties. Instead, under the new law, comparable work is “work that is substantially similar in that it requires substantially similar skill, effort, and responsibility and is performed under similar working conditions.” The law also provides that “a job title or job description alone shall not determine comparability.” Thus, under the Act, “comparable work” is not limited to employees who have the same job title. Indeed, the phrase “work that is substantially similar in that it requires substantially similar skill, effort, and responsibility and is performed under similar working conditions” is so vague that employers will have difficulty determining which jobs to compare for purposes of complying with the Act.

Although the Act’s prohibition on unequal compensation is broadly worded, it also contains important affirmative defenses for employers – defenses that were not available under the old law. Under the new law, an employer is not liable if it can demonstrate that a pay difference for comparable work is based on one or more of the following factors:

1. a bona fide seniority system; provided, however, that time spent on leave due to a pregnancy-related condition and protected parental, family and medical leave, shall not reduce seniority;
2. a bona fide merit system;
3. a bona fide system that measures earnings by quantity or quality of production or sales;
4. the geographic location in which a job is performed;
5. education, training or experience to the extent such factors are reasonably related to the particular job in question and consistent with business necessity; or
6. travel, if the travel is a regular and necessary condition of the particular job.

Employers may not reduce the pay of any employee in order to comply with the Act.

The Act also provides a “self-evaluation” defense for employers. Under the Act, employers who complete a good faith self-evaluation of their pay practices within three years of a claim, and can demonstrate that “reasonable progress has been made towards eliminating compensation differentials based on gender,” have an affirmative defense to liability for an equal pay violation. The self-evaluation may be of the employer’s own design, so long as it is reasonable in scope or detail in light of the size of the employer or consistent with standard templates or forms issued by the Attorney General.

The Attorney General has not yet issued self-evaluation templates or forms, but will hopefully post this information on its website before the Act goes into effect. Evidence of an employer’s self-evaluation or remedial steps undertaken in accordance with the Act cannot later be used as evidence of a violation, so long as the evaluation was completed prior to the alleged violation or within six months thereafter.

Restrictions on Wage Disclosure

In addition to the equal pay requirements described above, the Act also significantly limits an employer’s ability to control the flow of information regarding employee wages.

Specifically, the Act makes it illegal for an employer to: (1) require that an employee refrain from inquiring about, discussing or disclosing information about the employee’s own wages, or any other employee’s wages; (2) screen job applicants based on their wages; (3) request or require an applicant to disclose prior wages or salary history; or (4) seek the salary history of any prospective employee from any current or former employer, unless the prospective employee provides express written consent, and an offer of employment – including proposed compensation – has been made. An employer may, however, prohibit human resources employees, or any other employee whose job responsibilities require access to other employees’ compensation information, from disclosing such information. The new law also contains anti-retaliation provisions for any employee who opposes an action or practice made illegal under this section.

Damages and Enforcement

The Act provides for a private right of action. Unlike Massachusetts General Law Chapter 151B, the Massachusetts law prohibiting discrimination in the workplace, plaintiffs who wish to pursue claims under the Act are not required to file a complaint with the Massachusetts Commission Against Discrimination before filing in court. A prevailing plaintiff may recover damages (i.e., the difference between the wages she earns and the wages earned by her comparator), as well as an equal amount in liquidated damages. Prevailing plaintiffs also may recover reasonable attorney’s fees and costs. Additionally, the Attorney General may bring a cause of action under the Act.

The Act provides that plaintiffs may file a claim within three years of a violation. The law makes clear that an equal pay violation occurs each time an employee is paid, effectively resetting the three-year limitation period after each paycheck.

Recommendations for Employers

Once the Act becomes effective in 2018, employers will likely begin to see more complaints filed in court alleging a failure to provide equal pay, as well as separate enforcement actions by the Attorney General. Implementing a formal self-evaluation process into pay policies every three years is a crucial step for employers that wish to avail themselves of the affirmative defense under the Act. While employers wait for guidance from the Attorney General on how to conduct these self-evaluations, there are several things employers should consider before the Act goes into effect:

1. The Act prohibits employers from requesting or requiring an applicant to disclose prior wages or salary history. As a result, employers should consider reviewing and revising job applications and related forms to comply with those restrictions.
2. The Act requires that employers post a notice informing employees of their rights under the new law. It is possible that the Attorney General will issue a sample poster prior to the Act going into effect in 2018.
3. Given the various prohibitions contained in the Act, employers may need to train recruiters, and employees who interview or screen applicants, regarding the impact of the new law. Similarly, employers will need to review existing personnel policies and employee handbooks to ensure compliance with the Act’s provisions regarding the disclosure of wage-related information. Among other things, employers will need to eliminate any blanket prohibitions on an employee’s discussion of compensation-related information with other employees.
4. Employees who make decisions regarding compensation may need to be trained on the Act’s requirements, including the factors that may constitute a defense to a claim that an employee is not receiving equal pay for comparable work.
5. Employers should consider whether to audit their existing pay rates now, prior to receiving guidance from the Attorney General, to determine whether those rates may be susceptible to challenge once the Act goes into effect. Any employer contemplating such an audit also should consider whether an audit could or should be subject to the attorney-client privilege.
6. Employers should consider implementing an adequate internal complaint procedure to bring to light and address any equal pay issues.

As discussed above, the Act imposes a number of significant changes on employers’ pay practices. We currently anticipate that, once the Act goes into effect, both the Attorney General’s Office and the plaintiffs’ bar will begin investigating and asserting claims under the new law. As a result, it is important that employers reach out to employment counsel to ensure compliance with this new law before it goes into effect.

Footnote

1. Information on this bill is available on the Massachusetts Legislature’s website: https://malegislature.gov/Bills/189/Senate/S2119.

Article by Christopher B. Kaczmarek, Stephen T. Melnick and Joseph A. Lazazzero of Littler Mendelson