Client Alert: Massachusetts Enacts Ground-Breaking Equal Pay Act

August 9, 2016

Last week, Governor Baker signed the Massachusetts Equal Pay Act, one of the most expansive equal pay laws in the nation. The Act is intended to combat gender discrimination in the workplace and to reduce the persistent wage gap between men and women. The Massachusetts Attorney General is charged with enforcing the new law, which goes into effect on July 1, 2018.

What Is It?

The Equal Pay Act prohibits employers from compensating employees differently for "comparable work," 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. The Act has some features that distinguish it from recent legislation in other states to reduce the gender pay gap. Most notably, it prohibits employers from compelling job applicants to disclose their salary history. 

The law is not a blanket ban on wage differentials, however, as employers will be permitted to compensate employees differently, so long as they do so on the basis of at least one of six objective and quantifiable factors:

(1)  a seniority system (that does not take into account an employee's pregnancy or parental-related leave);

(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.

What Does The Act Mean For Employers?

Salary history. The Act prohibits employers from asking potential new hires about their salary history. (Applicants may still volunteer such information and employers may confirm it.)

Pay transparency. Employers may not discharge or otherwise retaliate against employees who discuss or reveal details of their or anyone else's compensation to other employees.

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, however, 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, in accordance with the so-called continuing violation doctrine. In other words, 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.

Steps Toward Compliance

Although we expect that in the coming months, the Attorney General will issue guidelines or regulations that clarify employers' obligations, it is not too soon to begin planning for compliance. To that end, we offer the following suggestions for employers:

1. Employers should perform an internal audit every three years to identify and address any wage differentials in their workforce. In other words, employers need to evaluate their own pay practices and to adjust wages and/or compensation practices accordingly. This practice will allow employers to avail themselves of the affirmative defense under the new statute.  

2. Establish an internal mechanism for employees to report any perceived wage differentials. In addition to posting a notice informing employees of their rights under the law, employees should be made aware of how (and to whom) they can raise complaints internally.

3. Review job descriptions and current salaries to ensure that any pay differentials are completely accounted for by the six factors described above.

4. Review personnel policies and practices to ensure that applicants are not asked to disclose their salary history. For example, employers should remove such inquiries from job applications materials.

5. Provide training on the new law to all management personnel who make or influence compensation-based decisions.

6. Review employee handbooks to ensure consistency with the new law. For example, eliminate prohibitions against discussing compensation with others. Review leave policies to ensure that pregnancy or parental-related leave does not constitute an interruption of service or otherwise impact an employee's seniority.