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August 31, 2016

Massachusetts Enacts Equal Pay Act: What employers can do now to prepare for its implementation

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In August Massachusetts enacted a new Equal Pay law to address gender pay inequality in the Commonwealth. The Act to Establish Pay Equity (the “Act”) will take effect July 1, 2018, replacing the Massachusetts Equal Pay Act, and will address gender pay inequality in the Commonwealth. Although it will be nearly two years before the new law goes into effect, the Act contains several key provisions that will require employers to begin to reevaluate and change their compensation and hiring processes. Given these significant changes, employers are advised to consider taking advantage of this lead time by beginning the reevaluation and implementation process.

The most significant change in the new law is the broadening of the definition of “comparable work” in the context of pay discrimination. The Act prohibits employers from discriminating “on the basis of gender in the payment of wages” and from “pay[ing] any person a salary or wage rate less than the rates paid to employees of a different gender for comparable work.” Critical to these prohibitions is the Act’s definition of the term “comparable work” as “work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions.” This definition alters the current standard that was established by the Massachusetts Supreme Judicial Court in Jancey v. School Committee of Everett that relied on comparing the “substantive content” of positions (i.e., whether the duties of the jobs have “important common characteristics”) as well as skill, effort, responsibility, and working conditions to determine whether pay equality discrimination had occurred. The Act does, however, make exceptions for pay inequities that are based on “bona fide systems” of seniority, merit, or productivity; 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 and consistent with business necessity”; or travel, “if the travel is a regular and necessary condition of the particular job.” Based on the new comparable work standard set forth in the Act, employers should consider beginning to analyze their current compensation structures, with specific focus on how and why they calculate differences in pay for certain positions, in particular those that are similar in title or function and, therefore, constitute “comparable work” under the Act.

Second, the Act also expressly creates an affirmative defense for employers that, within the previous three years and prior to the filing of a lawsuit by an employee, have performed a good-faith evaluation of their compensation practices and can show that “reasonable progress has been made towards eliminating compensation differentials based on gender for comparable work in accordance with that evaluation.” (But note that when eliminating differentials wages can only go up – an employer may not reduce the pay of any employee in order to comply with the Act.) Prior to July 1, 2018, the Attorney General is expected to promulgate specific regulations to provide guidance to employers on how to perform these evaluations. However, the longer and more thorough the evaluation period, the stronger an employer’s argument that it qualifies for the affirmative defense will likely be. Thus, even in the absence of the Attorney General’s regulations, employers who start the evaluation process now may realize significant benefits later.

Third, under the Act Massachusetts will become the first state to prohibit employers from asking job applicants about their salary history prior to making a job offer. The rationale behind this prohibition is that a prospective employer’s knowledge or use of an applicant’s salary history could compound past wage discrimination. Employers also may not require that an employee refrain from inquiring about, discussing or disclosing information about either the employee’s own wages, benefits or other compensation, or about those of any other employee, and may not retaliate against any employee who asserts or enjoys a right under the Act. A contract with an employee “to avoid complying with” the Act would be void. Accordingly, in anticipation of the Act going into effect, employers should, at a minimum, review their job application forms and other similar documentation to eliminate any questions concerning the applicant’s salary history. Employers should also consider retraining their HR or other hiring personnel so that they are aware of this new restriction and do not inadvertently violate it during the interview process. It should also be noted that an employer’s early adoption of this salary history prohibition may bolster its ability to qualify for the Act’s affirmative defense (discussed above), should it ever be necessary to do so once the Act goes into effect.

Finally, the Act may be enforced by the Attorney General or one or more employees. Unlike a typical employment discrimination claim, an employee need not file first with the Massachusetts Commission Against Discrimination – either the Attorney General or an employee may go directly to court. Damages include double the employee’s unpaid wages, benefits or other compensation, as well as attorneys’ fees.

The Act does not take effect until July 1, 2018, but employers may enjoy significant benefits from evaluating their compensation and hiring practices right now. Getting an early start on complying with the Act will help ensure better and more robust compliance when it becomes effective, and may also help lay a strong foundation in the event an employer ever needs to assert the Act’s good-faith affirmative defense.

About the Authors

Robert Blaisdell

Robert Blaisdell is a Boston attorney providing general business and corporate legal services to healthcare clients. You can find him on LinkedIn.

Callan Stein

Callan Stein is an associate in Donoghue Barrett & Singal’s Boston office. He regularly represents small and large businesses in litigation and general corporate matters. You can follow him on Twitter at @CallanSteinEsq

Andrew Maglione contributed to this alert.

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