Yesterday, the Massachusetts Attorney General's Office released guidance in the form of an "Overview and Frequently Asked Questions" (the "Guidance") interpreting An Act to Establish Pay Equity, which goes into effect July 1, 2018. A copy of the Attorney General's Guidance can be found here.
Many of you will recall that, in August 2016, Governor Baker signed into law An Act to Establish Pay Equity which amends M.G.L. c. 149 s. 105A, the Massachusetts Equal Pay Act ("Equal Pay Act" or the "Act"), to strengthen the prohibition on discrimination in wages based on gender, and to ensure Massachusetts employees receive equal wages for comparable work. The Equal Pay Act defines comparable work as work involving "substantially similar skill, effort and responsibility" and that is "performed under similar working conditions."
Despite its equal pay mandate, the law permits employers, in certain circumstances, to establish variations in the payment of wages among employees. Such variations may only be based on: seniority, merit, a system that "measures earnings by quantity or quality of production, sales, or revenue" (e.g., commission payments), the geographic location where a job is performed, education, training, or experience if such factors are reasonably related to the particular job, and/or travel (if the travel is a regular and necessary condition of the job).
The Act also prohibits employers from (i) screening applicants based on wage or salary history, (ii) seeking the salary history of an applicant (with two exceptions), and (iii) restricting employees from discussing their compensation with co-workers or colleagues. The Act creates an affirmative defense if, within the three previous years, the employer has completed a good faith self-evaluation of its pay practice that is reasonable in detail and scope and can demonstrate reasonable progress to eliminate pay differential based on gender.
The Guidance addresses several important aspects of the Equal Pay Act, including, among others, its applicability, the terms "comparable work" and "wages," the prohibition on seeking salary history, and the affirmative defense afforded to employers.
The Equal Pay Act applies to all "employees with a primary place of work in Massachusetts." An employee's primary place of work is where the employee does most of his/her work for the employer. The Guidance provides several examples illustrating the Equal Pay Act's applicability.
As noted above, for work to be comparable, it must involve "substantially similar skill, effort, and responsibility, and [be] performed under similar working conditions."
- Work is "substantially similar" if two employees' skill, effort, and responsibility are "alike to a great or significant extent, but are not necessarily identical or alike in all respects." The fact that two jobs may differ slightly in skill, effort and responsibility will not prevent two jobs from being classified as comparable.
- "Skill" includes an employee's "experience, training, education, and ability to perform the jobs." An employee's skill must be "measured in terms of the performance requirements of a job...."
- "'Effort' refers to the amount of physical or mental exertion needed to perform a job."
- "'Responsibility encompasses the degree of discretion or accountability involved in performing the essential functions of a job...."
Wages are defined broadly under the Equal Pay Act to include "all forms of remuneration for work performed, including commissions, bonuses, profit sharing, paid personal time off, vacation and holiday pay, expense accounts, car and gas allowances, retirement plans, insurance, and other benefits, whether paid directly to the employee or to a third-party on the employee's behalf." Although relevant for the determination of equal pay, the Guidance does not change the definition of "wages" for the purposes of the Payment of Wages law.
Prohibition on Seeking Salary History
With limited exceptions, employers (and agents acting on their behalf) are prohibited from seeking salary/wage history from prospective employees. Employers can seek such information to confirm salary/wage history if the applicant volunteers his/her prior salary/wage history, or after the employer has made an offer of employment with compensation.
Notably, an employer is entitled to ask a prospective employee about his/her salary requirements or expectations. The Guidance advises employers to proceed with caution and to frame this question in a manner that is not designed or intended to elicit the prospective employee's salary/wage history.
In addition, multi-state employers are required to comply with the Equal Pay Act if there is a possibility that the prospective employee "will be chosen or assigned to work in Massachusetts (or have Massachusetts as their primary place of work)[.]..."
The Equal Pay Act provides a complete defense to a claim if an employer has conducted a "good faith, reasonable self-evaluation of its pay practices within the previous three years and before an action is filed against it." According to the Guidance, an employer's eligibility for the affirmative defense "turns on whether the self-evaluation is conducted in good faith and was reasonable in detail and scope and the employer must also show reasonable progress towards eliminating any unlawful gender-based wage differentials that its self-evaluation reveals."
The Guidance considers a good-faith self-evaluation to be one the "employer conducts in a genuine attempt to identify unlawful pay disparities among employees performing comparable work." An employer's good faith must apply to its analysis regarding which jobs are comparable, and to the pay differentials themselves.
A self-evaluation that is reasonable in detail and scope is likely going to be one that takes into account a reasonable number of jobs and employees, relevant and reasonably available information, and has a reasonably sophisticated analysis of potentially comparable jobs, employee compensation, and whether the employer is appropriately using the six permissible reasons for pay disparities.
Assuming the self-evaluation was done in good faith and was reasonable in detail and scope, the employer must still demonstrate that it has made reasonable progress to eliminate any pay disparities that were identified. To make this showing, an employer will be required to specifically identify the steps it is taking to remedy the problem.
The Guidance includes a basic guide of the steps "employers should consider undertaking as part of a comprehensive self-evaluation." The Guidance also includes a link to the Attorney General's "Calculation Tool" to assist employers in the evaluation of comparable job groupings that have thirty (30) or fewer employees and a relatively simple pay structure.
If you have any questions about the Equal Pay Act and its interpreting Guidance, please contact a member of the Labor and Employment Group.
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