THESE UPDATES ARE OFFERED FOR INFORMATIONAL PURPOSES ONLY AND DO NOT CONSTITUTE LEGAL ADVICE OR RECOMMENDATION
Massachusetts Equal Pay Act
The Massachusetts Equal Pay Act is intended to combat gender discrimination in the workplace and to reduce the wage gap between men and women. The Massachusetts Attorney General is charged with enforcing the new law, which went into effect on July 1, 2018.
The key provisions of the Equal Pay Act are:
Equal pay for “comparable work” and the factors which may legally justify “variations in wages”;
Prohibition on “pay secrecy policies” and rules for using salary history in the hiring process;
Penalties for non-compliance; and
“Self-evaluations” of compensation practices as a defense to liability.
Equal Pay for Comparable Work:
The law prohibits employers from compensating employees differently for “comparable work,” which is defined as “work that is substantially similar” in “skills, effort and responsibility and is performed under similar working conditions.” In determining comparability between employees, employers cannot rely solely on job titles or job descriptions.
Employers will be permitted to compensate employees differently, as long as they do so on the basis of at least one of six objective and quantifiable factors:
(1) a seniority system;
(2) a merit system;
(3) a system that measures earnings by quantity or quality of production, sales, or revenue;
(4) geographic location;
(5) education, training or experience; and
(6) travel, if it is a regular and necessary condition of the job.
Prohibitions on Pay Secrecy and Asking Salary Related Questions:
Employers may not discharge or otherwise punish employees who discuss or reveal details of their or anyone else’s compensation to other employees.
The law will also prohibit employers from screening job candidates based on their previous salary or asking salary-related questions until after an offer is made. In addition, employers won't be able to contact an applicant's former company to confirm the wage amount until after an offer is made. Employers will only be able to verify past wage amounts if they have written permission from the applicant.
Internal Audit:
Employers may have an affirmative defense to claims brought under the Act if they can demonstrate that they have taken good faith measures within the previous three years to self-evaluate their pay practices, and have made progress toward eliminating wage differentials. Employers may not reduce the wages of male employees solely to comply with the Act.
Statute of limitations:
Employees will have three years to bring a claim under this law, but each new violation restarts the statute of limitations. Therefore, a violation occurs each time an employee is paid pursuant to a discriminatory compensation structure.
Remedies:
Both employees and the Attorney General may bring suit against employers who violate the Act. Employees may recover up to two times their damages in unpaid wages, as well as their reasonable attorney’s fees and costs.
Recommendations:
Employers should begin evaluating their compensation practices and preparing to conduct a self-evaluation to protect against costly litigation. Additionally, employers should examine their use of salary history in their hiring practices and make appropriate changes to comply with the Act.
Attorney General Guidance:
The Massachusetts Attorney General has recently published an Overview and Frequently Asked Questions regarding the amendment to the Massachusetts Equal Pay Act, to take effect on July 1, 2018. It be found at this link.
The guidance provides additional information on MEPA, including:
which employers and employees are covered by MEPA;
the definition of comparable work, including more detail on what “skill, effort, and responsibility” mean and how to evaluate working conditions;
the factors which may be considered in looking at the statutory exceptions to the equal pay requirement;
permissible and prohibited inquiry into salary history; and
liability and enforcement.
The guidance provides information regarding the affirmative defense for employers’ self-evaluations of pay practices. It has an appendix entitled, “Self-Evaluations – A Basic Guide for Employers”, which lists steps that employers should consider undertaking as part of a comprehensive self-evaluation.
In addition, the guide has information, including a pay calculation tool, for “an organization with small, clearly defined groupings of comparable jobs and relatively simple pay structures . . .” The guide also contains a “Sample Checklist – Policies & Practices Review” to help employers review potentially problematic employment policies and practices, and offers guidance on compliance.
We have highlighted a few key provisions of the AG Guidance, below.
Coverage of the Act:
According to the guidance, MEPA covers nearly all employers in Massachusetts, including state and municipal employers, irrespective of size. It does not apply to the federal government as an employer. The pay equity law applies to any employee with “a primary place of work in Massachusetts.”
What Is Comparable Work?
MEPA defines “comparable work” as work that requires substantially similar skill, effort, and responsibility, and is performed under similar working conditions. “Comparable work” is broader and more inclusive than the “equal work” standard of the federal Equal Pay Act. Determining whether jobs are comparable will require an analysis of the jobs as a whole. It is unlawful under MEPA to pay employees of different genders unequal wages for comparable work, unless a statutory exception applies—which requires a separate analysis.
What Does “Substantially Similar” Mean?
Under MEPA, “substantially similar” means that each of the factors being considered—in this case: skill, effort, and responsibility—are alike to a great or significant extent, but are not necessarily identical or alike in all respects. Minor difference are not enough to differentiate employees.
“Skill” is defined as the experience, training, education, and ability necessary to do the job. It does not mean the actual skill of the employee, but rather the requirements of the position.
“Effort” refers to the amount of physical or mental exertion needed to do the job.
“Responsibility” encompasses the degree of discretion or accountability involved in performing the essential functions of a job, as well as the duties regularly required to be performed for the job. It includes such factors as the amount of supervision the employee receives or whether the employee supervises others, and the degree to which the employee is involved in decision-making such as determining policy or procedures, purchases, investments or other such activities. Minor or occasional differences in responsibilities will not prevent jobs from being comparable.
The guidance lists examples to clarify. The Overview makes clear that titles or job descriptions alone are not enough to establish that two jobs are, or are not, comparable.
What Are Wages?
“Wages” is defined broadly 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. Wages include all forms of incentive pay, such as commissions, bonuses, profit-sharing, and other production incentives. With respect to health or life insurance, retirement plans, tuition reimbursement, and other similar benefits that employees may choose not to take advantage of (e.g., because they are covered by a spouse’s plan), what matters is that employees performing comparable work have the same opportunity to participate in benefit programs on the same terms, irrespective of gender—not whether they choose to do so. Wages also includes deferred compensation.
The Six Permissible Factors
Determining whether it is lawful to pay employees differently for comparable work requires an analysis that is separate from the analysis of whether jobs are comparable in the first place. MEPA permits differences in pay for comparable work only when based upon the following:
(i) 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);
(ii) A merit system;
(iii) A system which measures earnings by quantity or quality of production, sales, or revenue;
(iv) The geographic location in which a job is performed;
(v) Education, training or experience to the extent such factors are reasonably related to the particular job in question; or
(vi) Travel, if the travel is a regular and necessary condition of the particular job.
A pay difference will be permissible under MEPA if the entire difference is justified by one of these factors, or by a combination of these factors. MEPA does not recognize any other valid reasons for variations in pay between men and women performing comparable work.
What is a “system”?
A “system” is a plan, policy, or practice that is predetermined or predefined; used by managers or others to make compensation decisions; and uniformly applied in good faith without regard to gender.
What is a “system that rewards seniority with the employer”?
A seniority system is a system that recognizes and compensates employees based on length of service with the employer. The time employees spend on leave due to pregnancy-related conditions and protected parental, family, and medical leave, may not be counted to reduce seniority for purposes of MEPA. For purposes of MEPA, “protected parental, family and medical leave” means leave protected by statute, including the federal Family and Medical Leave Act, the state Parental Leave Act, the state Pregnant Workers Fairness Act, the state Small Necessities Leave Act, and the state Domestic Violence Leave Law; it does not mean all leave taken for any medical, parental, or family reason.
What is a “merit system”?
A merit system is a system that provides for variations in pay based upon employee performance as measured through legitimate, job-related criteria.
For example, an employer that has a written performance rating plan or policy that measures employee performance on a set scale from “unsatisfactory” to “exceeds expectations” and takes employees’ ratings into account in setting a portion of their salaries the next year likely has a qualifying merit system.
What is a “system which measures earnings by quantity or quality of production, sales, or revenue”?
A system that measures earnings by quantity or quality of production, sales, or revenue is a system that provides for variations in pay based upon the quantity or quality of an employee’s individual production (e.g., piecemeal pay or hours worked) or sales or other revenue generation (e.g., commissions or other revenue-based incentives) in a uniform, reasonably objective fashion.
When is the geographic location of a job a valid reason for variations in pay?
Different geographic work locations may constitute a valid reason for variations in pay for comparable work when the locations correspond with different costs of living or differences in the relevant labor market from one geographic location to another.
When are travel requirements a valid reason for variations in pay?
It is permissible to pay an employee who travels for work more than an employee who otherwise performs comparable work but does not travel, provided travel is a regular and necessary condition of the first employee’s job. Whether travel is necessary will depend on the circumstances of each job, including whether alternatives, such as remote participation, are options offered by the employer. Travel will not be considered necessary simply because an employee prefers or chooses to do so when alternatives are reasonably available. Regular commuting to or from a work location does not constitute “travel” for these purposes.
When may an employer pay an employee more based on education, training, or experience?
Pay differentials are permissible if they are based on education, training, or experience that is reasonably related to the particular job in question. An employee’s education, training, or experience will be reasonably related to his or her job and thus a valid reason for paying that employee more than another employee performing comparable work when, at the time the employee’s salary or wages were determined, a reasonable employer could have concluded that such education, training, or experience would help the employee to perform the particular job in a more efficient or more effective manner. For example, while an advanced accounting degree is not strictly required for most bookkeeping jobs, an employee with such a degree may be considered of higher value to an employer because accounting skills are relevant to the job.
May an employer pay employees of one gender less in wages or salary than employees of a different gender based on her wage or salary history?
MEPA specifically provides that an employee’s previous wage or salary history may not be used as a defense to claim of unequal pay.
Discussion of Wages Between Employees
An employer cannot prohibit employees from discussing their own wages or their coworkers’ wages, “or from disclosing wage information to any person or entity.” On the other hand, employers are not required to publish or otherwise disclose employees’ wages. Employers can also prohibit human resources employees, supervisors, or other employees whose job gives them access to others’ wage information, from disclosing pay information.
Wage/Salary History Inquiries
Employers cannot seek the salary history information of a prospective employee, either from the candidate or from a current or former employer. The only exceptions are where prospective employees voluntarily disclose their wage or salary history, or after an offer of employment, including pay, is made. This prohibition extends to both the company’s own employees and any agents, such as external recruiters or staffing agencies. The overview provides specific examples and further guidance.
Retaliation:
An employer may not retaliate against an employee for exercising or attempting to exercise rights under MEPA, including: formally or informally complaining or inquiring about an alleged violation of the law; communicating with any person, including coworkers, about any violation of the law; testifying or otherwise participating in an administrative or judicial investigation or other proceeding regarding an alleged violation of the law; or informing another person of that person’s potential rights under the law.
Retaliation includes any threat, discipline, discharge, demotion, suspension, or reduction in employee hours or compensation, or any other adverse action against any employee for exercising or attempting to exercise any right guaranteed under MEPA. Retaliation can include adverse actions taken against an employee during or after employment (e.g., giving an unwarranted negative reference), and need not occur in the workplace. Unlawful retaliation can be any action that would have the effect of dissuading a reasonable person from making a complaint or otherwise exercising his or her rights under MEPA.
Violations of MEPA
An employer that pays an employee less than its pays to employees of a different gender performing comparable work may be liable for: (1) the amount of the affected employee’s unpaid wages (i.e., the amount by which he or she was underpaid); (2) an equal amount of unpaid wages (i.e., double damages); and (3) the affected employee’s reasonable attorneys’ fees and other costs if he or she is awarded any judgment in his or her favor. An employer that violates one of the other provisions of MEPA—e.g. the anti-retaliation provision—may also be required to pay any damages actually incurred by the affected employee (or applicant).
The Self-Evaluation
An employer has an affirmative defense under this law if it can prove that it “completed a self-evaluation of its pay practices in good faith,” and “that reasonable progress has been made towards eliminating wage differentials based on gender for comparable work.” The Overview provides information on this defense. For example, good faith is “a genuine attempt to identify any unlawful pay disparities.” An employer must act in good faith both in determining which employees are performing comparable work, and in analyzing pay differentials. An employer cannot conduct a self-evaluation to achieve a pre-determined result, or to simply justify known disparities. A self-evaluation alone is not enough; to establish the defense, the employer must also show that it made “reasonable progress” towards eliminating pay disparities. The Overview provides additional information on what is reasonable progress.
The Overview also includes as an appendix a “Basic Guide” to conducting self-evaluations. It contains six steps for employers to consider, including:
Step 1: Gather relevant information.
Step 2: Identify comparable jobs.
Step 3: Calculate whether men and women are paid equally.
Step 4: Assess whether differences in pay are justified under the law.
Step 5: Remediate any disparities.
Step 6: Adjust pay practices.