On July 1, 2018, “
An Act to Establish Pay Equity,”
goes in to effect. The Act requires employers to eliminate pay disparities between male and female workers. The law provides that “No employer shall discriminate in any way on the basis of gender in the payment of wages, or pay any person in its employ a salary or wage rate less than the rates paid to its employees of a different gender for comparable work.” In short, men and women with the same jobs must be paid the same compensation. The burden is on the employer to make certain that such gaps are eliminated.
“COMPARABLE” WORK DOES NOT
JUST MEAN JOB TITLE!
At first glance, the Act might appear to apply primarily to “rank and file” workers—a female janitor should be paid as much as a male one, because this is clearly the same job. But, can the female General Counsel be paid less than, say, the Chief Sales Officer? These are quite different jobs, but for the purposes of the statute, it may not matter. The law defines “comparable” as work that requires substantially similar skill, effort and responsibility. Thus, the General Counsel might be in a position to claim that she is paid less than another “executive suite” employee on the basis of gender, even if the jobs have different titles.
LIABILITY, RISK, AND EXPOSURE
In many regards, the Act is a “strict liability” statute. It is no help that the employer did not “intend” for there to be a gender-based pay gap. It only matters that there is one. This means there is a positive obligation on the employer to proactively eliminate such disparities. Claiming “we didn’t mean for it to happen” is no defense under the Act.
The Act allows for the Massachusetts Attorney General to enforce the law. However, an employee can bring a civil lawsuit not only on her behalf, but on behalf of every female worker who is similarly situated in a class action. Were the Plaintiff to prevail, she might win double damages (i.e., two times the pay gap), and she might win the same award for each such employee. Additionally, an employer would be required to pay the reasonable costs and attorney fees of the Plaintiff in addition to its own defense costs. Accordingly, small compensation disparities can create a sizeable legal problem.
WHAT CAN EMPLOYERS DO TO MINIMIZE
Despite the draconian penalties in the statute, employers have a lot of options to get in front of these issues. First, there are exceptions for differences in pay for comparable work. These include:
- a system that rewards seniority with the employer (provided, however, that time spent on leave due to a pregnancy-related condition and protected parental, family and medical leave, shall not reduce seniority);
- a merit system;
- a system which measures earnings by quantity or quality of production, sales, or revenue;
- the geographic location in which a job is performed;
- education, training or experience to the extent such factors are reasonably related to the particular job in question; or
- travel, if the travel is a regular and necessary condition of the particular job.
Use of these exceptions will need to be bona fide, and litigation challenging such systems is certain to occur.
Employers can also defend against claims using the Act’s “Safe Harbor” mechanism. Employers can undertake a “self evaluation” of their workforces, identify comparable jobs, and assess whether gender-based pay gaps are justifiable under the law. When any gender-based pay gaps are identified, the employer must then take reasonable steps to correct the disparities. If the employer does all of these things, it may have a valid defense to individual and class action claims under the Act. What this self-evaluation entails may be quite different for small employers as compared with companies with 10,000 worker workforces. Indeed the Massachusetts Attorney General’s guidance suggests that the company might be able to perform back-of-the-envelope calculations, but that for a larger company “a multivariable regression analysis” may be appropriate.
OTHER TRAPS FOR THE UNWARY
The Act has a number of provisions that can trap the unwary employer. These include:
- The employer cannot decrease male-employee pay to create the illusion of pay equity. In other words, the employer must increase female pay, not decrease male pay.
- The Act has strong anti-retaliation provisions—employers cannot fire, demote, discipline or otherwise take “adverse action” against the employee for making internal pay equity complaints, or for filing a lawsuit. This is the case even if the Plaintiff ultimately does not prevail on the underlying claim.
- Employers can no longer ask or require prospective employees to provide salary history in Massachusetts, period. While this provision possibly violates the First Amendment, employers can seek to verify wage and salary history where the prospective employee has volunteered it. A best practice, however, will be to stay away from these topics in hiring decisions.
- Employers can no longer prohibit employees from discussing wages, or their coworkers wages, or from disclosing such information to other persons/entities. While this was previously illegal under Section 7 of the Federal National Labor Relations Act, the new Massachusetts Act creates additional legal obligations for employers in the Commonwealth.
Navigation of these issues requires experienced legal counsel. Your company should reach out to the experienced employment law practitioners at Tentindo, Kendall, Canniff and Keefe, LLP, to discuss strategies for risk avoidance and minimization.