United States: Massachusetts Signs Into Law Far Reaching Pay Equity Bill

On August 1, 2016, Governor Charlie Baker signed into law a pay equity bill which the Massachusetts Legislature passed by unanimous vote on July 23, 2016. The pay equity act is one of the strongest and most unique in the nation. Chief among the unique features is the prohibition on the use of prior salary in setting compensation and an affirmative defense for employers who conduct pay audits. The legislation differs from the federal Equal Pay Act (EPA) and other recent state pay equity laws, including California and Maryland, in several ways.

Comparable Work Presents a Broader Standard

The EPA requires that men and women in the same workplace receive equal pay for "equal work." "Equal work" means their jobs need not be identical, but "substantially equal." The newly passed Massachusetts legislation only requires "comparable work," meaning work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions. Thus, the legislation will give employees a larger pool of "comparator jobs" to point to should they feel underpaid in relation to their gender opposites. In fact, the "comparable work" standard appears to be similar to the broader-based standard used in pay-disparity claims under Title VII, except that Title VII also requires proof of intent. Recent Maryland and California laws also expand the pool of comparators.

Employers Face Heavier Burden to Justify Gender-Based Pay Differences

The Massachusetts bill places a greater burden on employers to justify gender-based wage disparities than the EPA. The bill provides that employers may rebut a pay differential by pointing to a bona fide seniority system (in which seniority is not reduced when an employee is on protected leave, such as family, medical or pregnancy leave), a bona fide merit system, a bona fide production system, geographic location of the job, travel required by the job, and education, training or experience. Unlike the EPA, but similar to California and Maryland, the bona fide factor must be job-related and consistent with business necessity.

Unique Affirmative Defense Based on Pay Audits

The law provides an affirmative defense to liability and pay discrimination claims if the employer can show that within the previous 3 years and prior to the commencement of the action, it has both completed a self-evaluation of its pay practices in good faith and can demonstrate that reasonable progress has been made towards eliminating compensation differentials based on gender for comparable work in accordance with that evaluation.

Employers Cannot Consider Prior Pay in Hiring

The bill prohibits employers from screening applicants using prior salary or other forms of compensation or requiring applicants to provide their compensation history, including during the interview process or in an employment application. Also, the bill prohibits employers from seeking the compensation history of applicants from current or prior employers. While California considered a similar bill prohibiting use of the prior salary in compensation decisions, the governor did not sign it into law. The Massachusetts bill is the first state to prohibit use of prior compensation in pay decisions.

Actions and Liability

A "violation" of the Massachusetts pay equity act occurs when there is a compensation decision or policy that causes an unlawful gender-based pay disparity. An employee or the attorney general can bring an action under the act if filed within three years of the alleged violation (or receipt of the wages stemming from the violation). The action can be filed individually or on behalf of others similarly situated. Recovery for the employee(s) is the amount of unpaid wages and an equal amount for liquidated damages. In addition, attorney's fees and costs, to be paid by the defendant, are mandatory in a successful action under the law.

Other Features of the Law

Under the Massachusetts law, like other state equal pay laws, employers may not prohibit employees from inquiring about, discussing or otherwise revealing their compensation to other employees. However, employers may restrict certain employees from such disclosure where their job duties provide them with access to other employees' salaries or other compensation. Finally, the law provides that employers may not reduce an employee's compensation in order to remedy a gender-based pay inequity.

Conclusion

The legislation will go into effect January 1, 2018. In the meantime, employers in Massachusetts, including multi-state employers with employees in the state, should consider conducting a privileged pay audit utilizing the standards set out in the Massachusetts law to identify and remedy potential risk areas and position themselves to take advantage of the affirmative defense should a pay challenge ensue. Employers should also review and update compensation practices/policies, including application forms and other hiring documents, paying special attention to whether the use of prior compensation has influenced, or had a direct impact on, employee compensation.

In sum, the broad comparator definition and the prohibition on prior salary consideration under the Massachusetts legislation further contributes to the patchwork of state pay equity laws with which multi-state employers must comply.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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26 Sep 2018, Seminar, Tokyo, Japan

Orrick’s Global Japan Practice is hosting a series of “Orrick Library” seminars to explore legal issues in various fields in Japan as well as the United States, Asia and Europe

26 Sep 2018, Conference, New York, United States

Employment Partner, Mandy Perry and Chair of Orrick's Global Employment Law Practice, Mike Delikat will be participating in the Global Business Protections 2018: International Restrictive Covenants and Confidential Information Conference.

10 Oct 2018, Conference, Florida, United States
Julie Totten is Program Chair of this year’s conference, Lynne Hermle is speaking on women in the courtroom, boardroom, and c-suite, and Erin Connell is speaking on pay equity and pay transparency.

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