Alert July 26, 2016

Massachusetts Enacts New Pay Equity Law

Summary

Massachusetts Governor Charlie Baker signed a pay equity bill into law on August 1, 2016. The law is intended to strengthen existing law by promoting compensation transparency, limiting questions to job applicants about compensation history, and encouraging employers to conduct reviews of their pay practices to detect compensation disparities based on gender. It creates a private right of action for aggrieved employees and applicants, without the need to first exhaust administrative remedies with the Massachusetts Commission Against Discrimination. An employer who violates the law will be liable for unpaid wages, attorneys’ fees and costs and liquidated damages, unless, under certain circumstances, the employer has conducted a good faith self-evaluation in accordance with the new law. Although the law will not become effective until July 1, 2018, employers will benefit by commencing the self-evaluation processes outlined in the law well before its effective date.

On August 1, 2016, Massachusetts became the latest state to enact comprehensive pay equity legislation, following the lead of similar measures in California and New York in the past year. An Act to Establish Pay Equity (the Act) will become effective on July 1, 2018.

Standard for Comparable Work

The Act prohibits employers from paying different “wages” (i.e., “all forms of remuneration for employment”) to employees of different genders who perform comparable work.

The Act defines “comparable work” to mean work that is substantially similar in that it (i) requires “substantially similar skill, effort and responsibility” and (ii) is performed under “similar working conditions.” The Act also defines “working conditions” to include environmental and other similar circumstances customarily taken into consideration in setting wages, such as reasonable shift differentials and the physical surroundings and hazards encountered in the job. Job titles and descriptions alone are not determinative, and liability is not predicated on a showing of an employer’s discriminatory intent. These standards vary in some respects from those that had developed in case law under the existing version of General Laws c. 149, s. 105A and it remains to be seen how courts will interpret the new language. The Act’s standards are also more flexible than those under the federal Equal Pay Act, which requires equal pay for work that is “equal” rather than merely “substantially similar.”      

The Act includes a number of exceptions, which would permit wage variations if based on one or more of the following factors:

  • A system that rewards seniority with the employer (except that time spent on a pregnancy, parental or family leave of absence cannot reduce seniority);
  • A merit system;
  • A system which measures earnings by quantity or quality of production, sales, or revenue;
  • The geographic location in which a job is performed (presumably this would account for cost of living differences);
  • Education, training or experience but only to the extent those factors are reasonably related to the job; or
  • Travel but only if travel is a regular and necessary condition of the job.

Under the existing version of c. 149, s. 105A, seniority had been the only exception listed, though some of the other exceptions above are listed under the federal Equal Pay Act and/or had developed in case law. The Act also departs from the approach of the federal Equal Pay Act and the California and New York laws, as it does not contain a catch-all “bona fide factor other than sex” exception found in those laws. Thus, if a pay differential is due to a reason that is a bona fide factor other than sex but that bona fide factor is not one of those listed in the Act, there may nevertheless be a violation of the Act. 

Enforcement and Remedies

Like the existing version of c. 149, s. 105A, the Act provides employees and applicants with a private right of action, in individual or class action form. However, the Act now states that employees and applicants need not first exhaust administrative remedies by filing a complaint with the Massachusetts Commission Against Discrimination. In this way, the Act departs from existing law, which had required claimants to exhaust those administrative remedies before proceeding to court. The Attorney General may also bring an enforcement action under the Act.

With respect to both the private right of action and the enforcement action, the new statute of limitations is three years (increased from one year under current law). The potential remedies are the unpaid wages that result from unequal compensation practices, liquidated damages in the same amount as the unpaid wages, and reasonable attorneys’ fees and costs.

New Defense Based on Self-Evaluation

The Act creates a new affirmative defense for employers that, within the three years prior to the commencement of an action, (i) have completed a good faith self-evaluation of their pay practices and (ii) can demonstrate that reasonable progress has been made toward eliminating any gender pay gap for comparable work in accordance with that evaluation. This self-evaluation 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, or may be consistent with standard templates or forms to be issued by the Attorney General. If an employer determines that a wage differential exists and that no exceptions apply, the employer may not reduce the wages of the higher paid employee solely to comply with the law.

Additional Prohibitions Affecting Hiring and Responses to Claims

In addition to the equal pay requirement described above, the Act contains the following three new prohibitions:

  1. Employers may not require, as a condition of employment, that employees refrain from inquiring about, discussing or disclosing their wages or their colleagues’ wages. Employers are not obligated, however, to disclose wage information to an inquiring employee or a third party.  Further, employers may prohibit human resources employees, supervisors, or any other employees whose job responsibilities require access to colleagues’ compensation information, from disclosing such information without prior written consent from the employee whose information is sought or requested, unless the compensation information is a public record.
  2. Before making an offer of employment that contains negotiated compensation terms, employers may neither seek the prior wage or salary history of job applicants from the applicants themselves or their current or prior employers nor require that applicants’ prior wage or salary history meet certain criteria.  However, if applicants voluntarily disclose their wage or salary history, employers may confirm that information.  In addition, once an offer with compensation terms has been negotiated and made, an employer may seek or confirm the prospective employee’s wage or salary history.
  3. Employers may not retaliate against employees, applicants or prospective employees for opposing acts or practices that violate the Act, for threatening or pursuing complaints under the Act, for testifying in a proceeding or participating in an investigation related to the Act or for disclosing their own compensation or asking about or discussing the compensation of others.

With respect to these new prohibitions, the Act provides the same private right of action, enforcement action and statutory penalties, with three differences. First, an action with respect to new prohibitions #1 and #3 above can be maintained only on an individual basis, rather than also on a class basis. Second, the potential remedies for violations of these prohibitions also include “any damages incurred”—the Act does not elaborate on what those damages may be. Third, the self-evaluation affirmative defense is inapplicable.

Regulations

The Act authorizes but does not require the Massachusetts Attorney General to issue regulations interpreting and applying the Act.

Preparation for the Act

In preparation for the new law and in light of the three year look back with respect to the self-evaluation affirmative defense, employers should consider reviewing their compensation and recruitment practices well before the July 1, 2018, effective date. Goodwin’s employment lawyers are pleased to provide guidance with respect to such reviews and about any other aspects of the Act. 

 

*Note to Readers: This replaces an earlier version of this alert. That version had been based on a substantially similar version of the Act, which had been posted as the final bill on the official Massachusetts legislature website when the previous alert was published.