On July 23, 2016, the Massachusetts Legislature became the latest state legislature to pass comprehensive pay equity legislation, following the lead of similar measures in California and New York in the past year. Governor Baker has been reported to have said that he will sign the new law, which is named The Act to Establish Pay Equity (the Act). The Act will become effective on January 1, 2018.
Standard for Comparable Work
The Act prohibits employers from paying a different wage (i.e., salary rate, hourly rate, and “benefits and other compensation”) to employees of different genders who perform comparable work. The Act defines “comparable work” to “solely” mean work that (i) requires “substantially similar skill, effort and responsibility” and (ii) is performed under “similar working conditions.” The Act also defines “working conditions” to include similar circumstances customarily taken into consideration in setting compensation, 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 bona fide system that rewards seniority with the employer (except that time spent on a pregnancy, parental or family leave of absence cannot reduce seniority);
A bona fide merit system;
A bona fide system which measures earnings by quantity or quality of production or sales;
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 and consistent with business necessity; 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 been 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. The Act also increases the statutory penalty for violations from $100 to $1,000.
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. 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 five new prohibitions:
1. Employers may not require employees to refrain from inquiring about, discussing or disclosing their wages or their colleagues’ wages. However, employers may prohibit human resources employees, 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.
2. Employers may not screen job applicants based on their wage histories, including by requiring that an applicant’s prior wages satisfy minimum or maximum criteria.
3. Employers may not request or require as a condition of being interviewed, or as a condition of continuing to be considered for an offer of employment, that applicants disclose their prior wage history.
4. Employers may not seek the salary history of any prospective employee from his or her current or former employers. However, a prospective employee may provide written authorization to his or her prospective employer for the prospective employer to confirm his or her prior wage history only after the prospective employer makes an offer of employment that includes compensation terms.
5. Employers may not retaliate against employees, applicants or prospective employees for their 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 one’s own compensation or asking about or discussing the compensation of another.
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 #4 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.
Employers will be required to post a notice informing employees of their rights under the Act.
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 January 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.