Massachusetts Passes Toughest Pay Equity Legislation in the Nation

Earlier this month, Massachusetts became the latest state to pass expansive pay equity legislation to combat the gender wage gap, surpassing even the rigorous new requirements passed by New York and California in late 2015. Notably, Massachusetts is the first state to ban employers from requesting salary history as part of the interview or employment application process. The legislation, which passed unanimously and was signed into law by Governor Charlie Baker, will go into effect on January 1, 2018. To prepare for its implementation, employers with employees in Massachusetts should begin to adjust their hiring process and compensation policies, and consider conducting a self-evaluation of their pay practices to take advantage of Massachusetts’ law’s affirmative defense.

New Standard
Expanding on the federal Equal Pay Act’s mandate of “equal pay for equal work,” the Massachusetts law will require “equal pay for comparable work.” The law prohibits discrimination by paying a different wage, including “benefits or other compensation,” to members of the opposite sex who are performing comparable work, which means work that is (1) “substantially similar in that it requires substantially similar skill, effort and responsibility” and (2) “is performed under similar working conditions.” The legislation goes on to define “working conditions” as “circumstances customarily taken into consideration in setting salary or wages, including, but not limited to, reasonable shift differentials, physical surroundings and hazards encountered by employees performing a job.” This definition follows the trend established by New York and California, broadening the standard for pay equity by including more positions when comparing compensation.

The law provides that a wage variation will be allowed only if based on one or more of the following factors:

i. A bona fide 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 bona fide merit system;
iii. A bona fide system which measures earnings by quantity or quality of production or sales;
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 and consistent with business necessity; or
vi. Travel, if the travel is regular and necessary condition of the particular job.

The Massachusetts law is unique in requiring that pregnancy-related conditions and protected parental, family, and medical leaves will not reduce employee seniority. Historically, this has not been the case in either federal or state legislation.

Employees Free to Discuss Salary
The law provides that employers in Massachusetts cannot prohibit employees from inquiring about, discussing, or disclosing information about their compensation. This provision is consistent with the National Labor Relations Board’s interpretation of employee “concerted activity” protected by Section 7 of the National Labor Relations Act. Employers are, however, allowed to prohibit human resource employees, or other employees whose job responsibilities require them to have access to other employee’s compensation information, from disclosing information about another employee without consent.

Ban on Salary History
The most novel provision of the new law is Massachusetts’ ban on employers seeking salary history as part of the interview or employment application process. Specifically, employers cannot inquire into an applicant’s salary history until “after any offer of employment with compensation has been made to the prospective employee.” Furthermore, when screening job applicants, employers cannot require that their prior salary satisfy a minimum or maximum criteria. Several other states – among them, California and Colorado – have similar legislation pending.

Self-Evaluation Affirmative Defense
Although the law extends the statute of limitations to file a pay discrimination claim from one year to three years, the law also provides a significant affirmative defense for employers that proactively seek to eradicate compensation differentials by self-auditing their pay practices. The law provides employers an affirmative defense to liability if, “within the previous three (3) years and prior to the commencement of an action,” the employer “completed a self-evaluation of its pay practices in good faith and can demonstrate that reasonable progress has been made towards eliminating compensation differentials based on gender for comparable work in accordance with that evaluation.” The law allows employers to design their own self-evaluation as long as it is “reasonable in detail and scope in light of the size of the employer.” The affirmative defense will allow employers to be proactive in their efforts to eliminate wage variations without fear of reprisal from employees since it cannot be used as evidence of a violation of the law.

Posting Requirement
Lastly, the Massachusetts law requires employers to “post a notice in their workplaces notifying employees of their rights under section 105A of chapter 149.” The notice needs to be posted in one conspicuous location where employees congregate. This requirement, like so many others, is unique to Massachusetts and is not a requirement under New York or California’s legislation.

Massachusetts is the first state to pass legislation banning employers from asking applicants about salary history, narrowing the meaning of seniority, and requiring pay equity act postings, but it will certainly not be the last. Employers, especially those with employees in Massachusetts, are advised to conduct a self-evaluation of their pay practices within a reasonable amount of time in order for them to take advantage of Massachusetts’ law’s affirmative defense. Employers should also begin to adjust their hiring process and compensation policies, and modify their handbooks to comply with the new law.

For questions regarding this blog, or pay equity laws generally, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

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