New Equal Pay Law Offers Little Clarity, New Defenses

By:

David R. Kerrigan, Esq., Lindsay M. Burke, Esq. and Ryan P. Menard, Esq.

Massachusetts employers take notice: the Massachusetts Equal Pay Law becomes effective July 1, 2018, and past practices, like asking a prospective employee during an interview how much they were paid in their old job, will violate the law.  Employers need to understand the new law so they can ensure they are in compliance, avoid traps, and take advantage of the law’s defenses. 

The New Law Broadly Reboots Equal Pay Requirements

The “new” Equal Pay Act does not actually break new ground. Massachusetts has required equal pay since 1945, when the state became the first in the country to enact this type of law.  The problem with the prior law is that it only required equal pay for “work of like or comparable character,” and courts interpreted that language narrowly, to essentially require equal pay only for identical jobs. 

The new statute, signed into law on August 1, 2016, with compliance delayed until July 1, 2018, reinvigorates the equal pay law by defining “comparable work” more broadly than the courts did.  Starting July 1, 2018, employers are prohibited from discriminating against employees based on gender, and must pay the same wages to employees of different genders “for comparable work,” defined to mean work which “is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions.” 

The problem remains: what does that mean?  For example, is a construction company’s human resource director and project manager—both of whom work in an office and supervise employees—perform work involving “similar skill, effort and responsibility”?  How about a controller and a human resource manager? What about a high school science teacher and middle school English teacher at a private school? 

To help interpret the law, the Office of the Attorney General recently issued a bulletin which provides guidance on many of these issues, although many will still need to be sorted out in practice. The AG’s bulletin states that substantially similar work means that each of the factors considered – skill, effort, and responsibility – are alike to a great extent, but not necessarily identical. Minor differences in skill and responsibility will not prevent two jobs from being considered substantially similar. “Skill” includes such factors as experience, training, and the ability required to actually perform the job, not what skills the employee may have, if those skills are irrelevant to the job function.

For example, a bookkeeping or controller job frequently requires accounting skills, but does not necessarily require customer service skills.  As a result, even if a bookkeeper or accounting person has a similar degree to other employees, those positions may not be comparable to a project manager or customer service representative because of the actual skills one needs to perform the job.    

“Effort” to perform the job means, not surprisingly, the amount of physical or mental exertion needed to perform the job.  For example, a job which requires a person to stand all day is likely not comparable in effort to a job which involves sitting all day at a desk. On the other hand, the AG’s bulletin states that the amount of physical exertion which goes into the average janitorial and food service jobs may be “substantially similar” enough to be comparable.  

Finally, the AG defined “responsibility” to mean the degree of discretion or accountability involved in performing the essential functions of the job. This includes factors such as the amount of supervision the employee receives or whether the employees supervises others, and the degree to which the employee is involved in decision making such as determining policy or procedures. 

New Defenses Provide New Protection

Of course, there are valid reasons to pay employees differently, and the new law (unlike the original equal pay law) recognizes them.  For example, employers can vary employee pay based on systems measuring seniority, merit, earnings or production, geographic locations, travel requirements, or an employee’s level of education, training, or experience (if there is a business reason for the distinction).  To avoid liability, however, employers will need to implement these types of systems consistently, and will need to prove both the existence and consistency of these systems if challenged in court.  

The law also provides an “affirmative defense”—that is, an absolute bar to liability.  To take advantage of the affirmative defense, an employer must undertake a comprehensive self-evaluation of the way it pays its workers, and make “reasonable progress” toward implementing equal pay across the board.  While even this is unclear—what evaluation is necessary? What is “reasonable progress?—employers may find that this voluntary self-audit and remedial action is far preferable to defending (and possibly losing) equal pay claims in court.   This is particularly true where successful claims under the new law can subject employers to double damages and an order to pay the employee’s legal fees.

Employers Must Make Big Changes

Many employers will have to make changes, and to make changes in the right way.  Say, for example, that you determine that two of your employees, one male and one female, get paid differently for “comparable work.”  What do you do?  The new law tells us—the employer must raise the woman’s salary to match the man’s, and not the other way around. 

Similarly, employers must not only change their pay practices, but their hiring practices.  Employers can no longer require applicants to disclose their prior wage history, nor can employers ask an applicant’s former employers about salary history during the interview process.  Historically, women’s previous low pay has been used as an excuse to continue to pay them less than their male peers, and the prohibition on asking about prior pay is an attempt to rectify this.  In addition, once hired, employees cannot be prohibited from discussing and comparing their wages.

Employers Should Prepare Now For The New Law

Employers should start preparing now to comply with the new law. 

First, they should review their written pay policies, to determine whether there is any formal method to the madness of how employee wages are decided.  Employers will want to make sure that their written policies accurately reflect the way they decide how to pay their workers, and will want to make sure that the way they pay their records is consistent with those policies.  Employers also may want to start taking advantage of the affirmative defense by performing a pay equity audit, which compares the way employees are paid and taking steps to comply. 

An employer risks significant liability by failing to pay equally.  Employees who sue for unequal pay receive mandatory double damages and their attorneys’ fees and costs, and the statute of limitations is three years.  Once one employee brings a claim, employers can expect others to follow, and defense fees alone—never mind damages—add up quickly.

To make sure your company does not run afoul of this important law, review your written policies and pay records with counsel.  Please also contact us if you would like to conduct a pay equity audit in order to take advantage of this important safe harbor.

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