Pay Attention to This Measure – State’s Pay-equity Legislation Requires Some Planning

Early last month, Mass. Gov. Charlie Baker signed a new law aimed at strengthening pay equity for women in the Commonwealth.
The new law amends the state’s Equal Pay Act by imposing stringent equal-pay obligations on employers. The purpose of the law is certainly commendable, but the legislation goes beyond pay-equity issues by prohibiting certain pay-related conduct that is routine in some workplaces, including asking job applicants about their wage history and requiring employees not to discuss compensation.
The new law will be enforced by the state Attorney General’s Office, but it also allows employees to sue their employers in court. The law takes effect in 2018, but employers should start planning today for necessary compliance obligations. Employees who successfully sue under the new Equal Pay Act will be entitled to recover all unpaid wages, plus an amount equal to unpaid wages as liquidated damages, as well as attorney’s fees.

Equal Work vs. Comparable Work
Under the existing Massachusetts Equal Pay Act, employers are required to pay men and women equally for comparable work. The current version of the law, however, does not define ‘comparable.’ Some judicial decisions interpreting the comparable-work language have suggested that comparable work is something equivalent to the ‘equal pay for equal work’ standard applied in federal law.
The legislation signed by Baker — which was also passed unanimously in the state House and Senate — defines comparable work in a much broader fashion. The new law defines comparable work as work that requires “substantially similar skill, effort, and responsibility” and is performed under “similar working conditions.”
This ‘substantially similar’ language is likely to open the door to more equal-pay lawsuits in Massachusetts because it is much less demanding than the ‘equal work’ language used under federal law.
Look at it this way: consider how many employees truly perform ‘equal work.’ Regardless of your answer, it’s probably safe to say many more employees perform work that is ‘substantially similar.’ When the law takes effect in 2018, all employees performing substantially similar work must be paid the same, unless a permissible variation applies.

Permissible Pay Differences
Some variations in pay will still be permissible, even for employees performing comparable work. If the difference is attributable to one (or more) of the following factors, wage-differential liability may be avoided:
• A seniority system;
• A merit system;
• A compensation scheme that measures earnings by quantity or quality of sales;
• Geographic location of the job;
• Education, training, and experience; or
• The amount of travel required.
Unfortunately, the new law does not provide any guidance explaining how these exceptions will work in practice, leaving many questions unanswered. For example, is a 15-mile difference in geographic location of the job sufficient to justify pay variances for comparable work? What about a 50-mile difference? Does a bump in pay after an initial 90-day introductory period constitute a legitimate seniority system? The state Attorney General’s Office has the power to issue regulations interpreting the new law, so it is likely the agency will put out guidance helping to clarifying these terms.
One thing we do know is that employers may not reduce the salary of an employee in order to comply with the new law. Employers who have unexcused pay differentials will need to ‘level up’ by bringing the pay of lower earners up to the pay of the highest earner doing comparable work.

More than Pay Equity
The new law goes beyond requiring equal pay for comparable work because it also prohibits employers from engaging in several common wage-related practices. When the new law takes effect, employers will no longer be allowed to require applicants to provide wage and salary history on job applications or at any other time before an offer of employment is extended.
This means job applications and interview practices may need a refresher. The law also penalizes employers who require employees not to discuss compensation with co-workers.
There is one silver lining for employers. The new Equal Pay Act provides an affirmative defense to employers who complete a “good-faith” self-evaluation of their pay practices and demonstrate “reasonable progress” toward eliminating any wage differentials. This means that employers who adequately audit their pay practices may avoid liability under the new law. However, the employer’s self-evaluation must be “reasonable in detail and scope in light of the size of the employer.” Again, regulations from the Attorney General’s Office might shed light on what constitutes an appropriate self-evaluation.
Skoler, Abbott & Presser will also be hosting a labor and employment law symposium the morning of Tuesday, Sept. 20, at which attorneys from the firm will be discussing significant developments in state and federal law, including the Massachusetts pay-equity law.