THE MASSACHUSETTS PAY EQUITY LAW: WHAT SHOULD EMPLOYERS DO TO COMPLY, CONDUCT PAY INEQUITY SELF-AUDITS, AND PROTECT THEMSELVES FROM LIABILITY?

by Employment Attorney Leslie Lockard
The Law Office of Leslie Lockard, P.C.
P.O. Box 537
Walpole, MA 02081
Tel. 508 850-9800
FAX 508 850-9801
Email: Llockard@leslielockard.com
Website: www.LeslieLockard.com
August 17, 2016

Massachusetts has now enacted a new Pay Equity law aimed at equalizing compensation of male and female employees. The law includes a number of specific requirements that employers must follow. The law also provides employers a significant inducement to perform self-audits to identify, and take reasonable steps to eliminate, what state law will now deem to be unlawful pay disparities. Employers who do so, in accordance with the law, will be provided an affirmative defense against Massachusetts pay inequity liability. Such a defense would be valuable, as liability under this law could be substantial. The law permits both employees, and the Attorney General’s Office, to bring pay inequity lawsuits against employers, either on behalf of an individual employee or multiple employees. An employer deemed to have violated the law will be held liable for double the amount of the inequitably unpaid wages (based on a time period beginning up to three years before the last inequitably paid paycheck), plus payment of the employee’s or AG’s attorney fees.

The law does not take effect until July 1, 2018, but employers will need to understand the law and begin planning their compliance efforts now.

What Are The Basics of the New Pay Equity Law?

The new state pay equity law applies to all forms of remuneration for employment and prohibits employers from:
  1. discriminating in any way on the basis of gender in compensating employees, and
  2. paying any person a compensation rate less than the rates paid to its employees of a different gender for “comparable work”. “Comparable work” that must be paid at an equal rate is “work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar “working conditions” (e.g., similar shifts, similar physical surroundings, similarly hazardous conditions).
This definition of “comparable work” is worded in very general terms, and therefore gives employers little guidance as to which types of work must now be paid equally. The Attorney General will presumably issue regulations or other guidance to help employers better understand what the law requires.

The law does specify, though, that variations in compensation will not be prohibited if they are based upon:
  1. a system that rewards seniority with the employer (but time spent on leave due to a pregnancy-related condition or protected parental, family and medical leave, cannot reduce seniority);
  2. a merit system;
  3. a system which measures earnings by quantity or quality of production, sales, or revenue;
  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 job in question; or
  6. travel, if the travel is a regular and necessary condition of the job
The fact that two positions have different job titles or job descriptions will not be sufficient in itself to render the two positions non-comparable.

Employers cannot eliminate a disparity by lowering the compensation of any employee. (The intent here is that if an employer finds that a female is earning less than a male for comparable work, the disparity will be rectified by raising the woman’s compensation, not by decreasing the man’s).

An employee’s previous compensation history cannot be used as a defense to a claim of failing to provide equal pay for comparable work.

To protect themselves from liability, employers will probably need to develop clear, objective and well documented systems of evaluating performance and determining what their positions will pay.

Several Common Employer Practices Will Now Be Prohibited:
  1. Seeking compensation history information from job applicants or from their current or former employers, or requiring that their compensation history meet certain criteria. Thus, employers will have to remove from their job applications any questions about what an applicant is earning or has earned in the past. They will also have to train their hiring personnel and any outside recruiters they may use not to seek such information.
  2.  Requiring employees not to disclose, discuss, or inquire about their own or other employees’ compensation. Employers will therefore need to revise any handbook or policy language that states otherwise, and train their supervisors not to reprimand or discipline employees for such discussion or inquiries. The law specifies two exceptions to this requirement:
    1. the law does not require an employer to disclose an employee’s compensation to another employee or to a third party.
    2. an employer may prohibit a human resources employee, a supervisor, or any other employee whose job responsibilities require or allow access to other employees’ compensation information, from disclosing such information without prior written consent from the employee
CONDUCTING A SELF-AUDIT IN ACCORDANCE WITH THE LAW CAN PROVIDE A VALUABLE AFFIRMATIVE DEFENSE TO LIABILITY

The law seeks to motivate employers to voluntarily conduct self audits and take reasonable steps to eliminate any pay disparities they discover, by providing an affirmative defense to state pay inequity liability to employers who do so. More specifically, the law states:

An employer who, within the previous 3 years and prior to the commencement of a pay inequality lawsuit, has both completed a self-evaluation of its pay practices in good faith and can demonstrate that reasonable progress has been made towards eliminating any wage differentials based on gender for comparable work found in that evaluation, will have an affirmative defense to state law inequity liability.

A few points to know about pay equity self-audits:
  1. The law says that an employer’s 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 it may be consistent with standard templates or forms issued by the Attorney General. It probably makes sense for employers to wait for a while before commencing a self-audit process to see what guidance or templates and forms the Attorney General may issue to assist employers in this process.
  2. A self audit is likely to be a lengthy process, involving 1) figuring out how to design and conduct the audit; 2) conducting the audit; 3) evaluating and considering the results of the audit; 4) gathering any additional information that may be needed to clarify the results of the audit; 5) deciding what steps to take as a result of the audit; and 6) taking whatever steps are indicated by the results of the audit. Thus, employers who decide to conduct a self-audit should begin the process early enough to have completed what they need to do by the effective date of the law.
  3. The law states that the content of the audit, or steps taken as a result of the audit’s findings, cannot be used as evidence in a state pay inequity lawsuit as evidence that the employer was not in compliance before the audit. HOWEVER, this protection probably would not apply if an employee brought a claim under federal pay equity or discrimination laws. Therefore, employers would be well advised to consult with their employment attorney about how to conduct the audit in such a way as to minimize risks of it being used as evidence against the employer in federal law claims. For example, employers may want to have their attorney direct the audit in order for the attorney client privilege to apply to the audit.

EMPLOYERS SHOULD KEEP THEMSELVES INFORMED OF NEW DEVELOPMENTS IN THIS LAW

There are many questions about this law that are presently unclear. For example, how will the law view reliance on market pay rate surveys that many employers use in determining what to pay a particular employee? And what if an employer has to pay a new hire significantly more than it would usually pay, for example, because someone must be hired immediately to replace an employee who has departed just before the employer’s busiest season. Must the employer then similarly raise the compensation of other employees doing “comparable work”?

Employers should keep themselves informed about this law as new developments occur and clarifications are issued. We will all need to watch in particular for guidance from the Attorney General, who will presumably issue regulations or other guidance to clarify ambiguities in the law and advise employers about how to conduct self audits. The Attorney General will also issue a poster about the new law that employers will be required to post.







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Contact Info

Attorney Leslie Lockard
The Law Office of Leslie Lockard, P.C.
P.O. Box 537
Walpole, MA 02081
Tel. 508 850-9800
FAX 508 850-9801
Email: Llockard@leslielockard.com
Website: www.LeslieLockard.com