United States: Maryland Employers: Are You Ready? The Maryland Equal Pay For Equal Work Act Goes Into Effect October 1, 2016

Maryland's Equal Pay for Equal Work Act (the "Act") is scheduled to take effect on October 1, 2016. The Act amends Maryland's existing Equal Pay law, expanding its protections against wage discrimination on the basis of sex in a number of significant ways. The Act represents another example of the growing trend of new pay equity and transparency laws being enacted in states across the country. Below we discuss the key provisions of the Act.

Extension of Prohibition of Pay Discrimination to Gender Identity

The Act extends the protection against wage discrimination on the basis of sex to wage discrimination based upon gender identity. In other words, beginning October 1, 2016, Maryland employers are not only prohibited from paying employees differently on the basis of their sex, but also on the basis of their gender identity.

Expansion of the Meaning of "Wage"

The Act also adds a definition of the term "wage." Under the Act, "wage" includes "all compensation for employment." The Act specifically provides that "wage" includes "board, lodging, or other advantage provided to an employee for the convenience of the employer." Accordingly, employers must be concerned with ensuring pay equity with respect to all elements of compensation to their employees, not just base pay.

Expansion of "Same Establishment" Comparison Criteria

Maryland law had already prohibited employers from discriminating against employees by paying employees of different sexes differently when "both employees work in the same establishment and perform work of comparable character or work on the same operation, in the same business, or of the same type." In addition to expanding this prohibition to include pay discrimination on the basis of gender identity, the Act also expands the definition of the phrase "deemed to work at the same establishment as another employee," to include employees who "work for the same employer at workplaces located in the same county of the State."

This modification potentially expands the pool of comparators in a discrimination action. In the past, employees could only use employees based in their same office as comparators. Under the Act, employees can attempt to establish wage discrimination claims against employers with multiple offices in the same county by comparing their pay to the pay of an employee in an entirely separate office. One can foresee a situation where an employer in Montgomery County, Maryland pays higher wages to employees who work in Bethesda or Potomac (which are part of or close to Metropolitan D.C.), than those who work in places like Clarksburg, Maryland. Under the Act, that location-based pay differential could provide fodder for pay discrimination claims, although the employer will have the ability to defend that wage differential as a bona fide factor justifying the disparity.

Employers Can Only Increase Wage to Address Unlawful Wage Disparities

The Act recognizes that employers may affirmatively make wage adjustments to rectify any disparities that exist. Indeed, as discussed below, Maryland employers should conduct pay equity analyses and make any necessary adjustments to avoid potential liability under the Act. However, Maryland employers need to be aware that the Act prohibits reducing another employee's wages to ensure compliance with the Act. In other words, only upward adjustments will be permitted to correct any wage disparities. This was a requirement in the original law and remains in place with the passage of the Act.

"Steering" is Expressly Prohibited

Employers who are federal government contractors are familiar with the Department of Labor's Office of Federal Contractor Compliance Programs' focus on a theory of discrimination known as "steering," whereby the employer is accused of discriminating against employees by directing employees who are members of a protected class toward lower paying jobs. The Act expressly addresses and prohibits "steering" as well as other actions that would depress a worker's earnings if based on sex or gender identity. Specifically, the Act prohibits employers from "providing less favorable employment opportunities" based upon an employee's sex or gender identity. "Providing less favorable employment opportunities" is defined as:

  1. assigning or directing the employee into a less favorable career track, if career tracks are offered, or position;
  2. failing to provide information about promotions or advancement in the full range of career tracks offered by the employer; or
  3. limiting or depriving an employee of employment opportunities that would otherwise be available to the employee but for the employee's sex or gender identity."

Employer Defenses

While the Act broadly prohibits discrimination in pay and employment opportunities based upon sex and gender identity, it does make clear that certain non-discriminatory reasons for differences in wages will not violate the Act. The Act provides that wages that vary due to one or more of seven exceptions are not prohibited:

  1. a seniority system that does not discriminate on the basis of sex or gender identity;
  2. a merit increase system that does not discriminate on the basis of sex or gender identity;
  3. jobs that require different abilities or skills;
  4. jobs that require the regular performance of different duties or services;
  5. work performed on different shifts or at different times of day;
  6. a system that measures performance based on a quality or quantity of production; or
  7. a bona fide factor other than sex or gender identity, such as education, training, or experience."

To rely upon the seventh exception, which will arguably be the most common explanation for a wage variance, the bona fide factor must not be "based on or derived from a gender-based differential," must be "job-related with respect to the position and and consistent with a business necessity," and must "account[] for the entire wage differential."

Although the Act has expanded the legitimate bases for pay disparities, it also makes clear that employees bringing claims may demonstrate that an employer's reliance on one of these exceptions "is a pretext for discrimination on the basis of sex or gender identity."

Pay Transparency

The Act also includes new pay transparency protections. Specifically, employers may not prohibit an employee from "inquiring about, discussing, or disclosing the wages of the employee or another employee," or "requesting that the employer provide a reason for why the employee's wages are a condition of employment." In addition, an employer may not take any adverse employment action against an employee for: "inquiring about another employee's wages; disclosing the employee's own wages; discussing another employee's wages if those wages have been disclosed voluntarily; asking the employer to provide a reason for the employee's wages; or aiding or encouraging another employee's exercise of rights under [the Act]."

The Act does not, however, permit an employee with access to other employees' wages by virtue of that employee's essential job functions to disclose the wages of other employees without restriction. Employers are permitted to discipline employees for disclosing the wage information of other employees if the employee whose wages are disclosed did not voluntarily disclose his or her wages to that employee or if the disclosed wage information of other employees is known solely because of the employee's essential job function.

In addition, the Act does not preclude employers from limiting discussion of wages in some basic ways. For example, employers may establish reasonable workday limitations on the time, place, and manner for inquiries, discussions, or disclosures about employee wages, provided such limitations are set forth in a written policy provided to their employees. The written policy also must not "diminish employees' rights to negotiate the terms and conditions of employment under Federal, State, or local law." This includes any protections that the National Labor Relations Act may provide with respect to speech in the workplace. The policy may also prohibit employees from discussing the wages of another employee without the permission of that employee. Should an employee fail to adhere to such limitations established in a written policy and subsequently suffer an adverse employment action, the employer may use the policy as an affirmative defense to an employee's claim against the employer. Any written policy must be consistent with the standards adopted by the Maryland Commission on Civil Rights. It is unclear when the Commission will release these standards.

The Act makes clear that despite these employee protections, the Act does not give employees license to disclose: (1) their employer's "proprietary information, trade secret information, or other information that is otherwise subject to a legal privilege or protected by law"; or (2) wage information of the employer to the employer's competitor.

Private Cause of Action and Remedies

The Act provides a private right of actions for employees who may bring a suit on behalf of himself or herself as well as other similarly situated employees.

If the employee proves that his or her employer "knew or reasonably should have known" that wages paid to employees differed on the basis of sex or gender identity and there was no legitimate non-discriminatory reason for the variance, the affected employee may obtain injunctive relief and damages. The Act permits the recovery of the difference between the wages paid to employees of the favored group as compared to the disfavored group (where the employees all performed the same type of work), as well as liquidated damages in an amount equal to those wages.

For violations of the pay transparency provision of the Act, if an employee proves that his or her employer "knew or reasonably should have known" that the employer's conduct violated the Act's pay transparency provisions, then an affected employee may obtain injunctive relief and actual damages, as well as liquidated damages in an amount equal to actual damages.

The Act also permits prevailing employees to recover their reasonable attorneys' fees and costs, as well as prejudgment interest.

Posting Requirement

The Act requires employers to post a copy of the Act in the workplace. The poster should be posted in the same location as the other employment-related postings. The poster is available here.

Practical Guidance

As of October 1, 2016, the Act raises the stakes for failing to remedy pay equity issues for Maryland employers. Maryland employers must now ensure that differences in all types of compensation among employees of different sexes and gender identity in all of their establishments in a single county can be explained and defended by justifications provided under the Act. Indeed, Maryland employers will now be at increased risk of pay equity lawsuits, including those brought on behalf of classes of similarly situated employees.

Due to the increased risk of pay equity disputes, it is more important than ever that employers take proactive steps to identify and mitigate risks associated with compensation discrimination. Maryland employers should consider commissioning a pay audit to identify potential disparities in pay and identify any necessary steps to remedy those disparities. Any such pay audit should be conducted by counsel to provide a basis to assert privilege over the audit and its results.

Additionally, employers should review the manner in which they determine compensation for employees, their hiring practices, and their pay increase processes to ensure that those policies do not adversely impact employees based upon sex or gender identity.

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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