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Getting a Jump Start on the Competition: Implementing the Equal Pay Act

On August 1, 2016, Massachusetts passed an historic revision to its Equal Pay Act. The new law, called An Act to Establish Pay Equity (“the Act”), strengthened the existing legislation in a number of key ways, as we discussed in detail in a previous blog posting. Specifically, the law: broadens the definition of “comparable work,” making it harder for employers to distinguish between work on the basis of job titles alone; prohibits employers from reducing seniority for employees who took protected parental, family, or medical leave; extends the statute of limitations from one year to three years (which means employees who received unequal pay can recover up to three years’ worth of the salary differential, plus liquidated damages for that same amount); prohibits employers from asking about a prospective employee’s salary history prior to making an offer of employment and negotiating a salary; and does not allow employers to prohibit employees from talking about their salaries with coworkers. As with the previous version of the law, it is still illegal to retaliate against someone for asserting their rights under this Act. The amended statute also explicitly provides legal protections for employers who can show their good faith efforts to comply with the law.

The new law may require some sizeable shifts in the way that courts, employers, and employees look at the concept of “equal pay for equal work.” Change doesn’t happen overnight, and the new law is going to require employers to make several changes to their budgets, hiring practices, and office culture. These changes are going to take time. Because the new law does not go into effect until July 1, 2018, employers have nearly two years to get familiar with the law, implement changes, and make sure they aren’t caught flatfooted when July 2018 rolls around, and employees can start recovering 3 years’ worth of salary discrepancies, plus liquidated damages, and attorney fees for lingering salary inequality.

The Act provides employers with a big incentive to take prompt action to address pay inequality. The law provides that an employer who completes a self-evaluation of its pay practices in good faith and makes reasonable progress toward eliminating any gender-based wage differentials for comparable work under the law will have a defense against equal-pay actions brought within 3 years of that evaluation. Employers will have to do some work to develop evaluation processes that satisfy the good-faith requirement of the law.

As part of this, employers will need to reassess what they consider to be “comparable” jobs. The law intentionally broadened the scope of “comparable work,” and sought to remove false distinctions based on job titles and job descriptions. In addition to comparing pay between people who hold the same or similar job titles, companies will have to compare pay between people who do work of “substantially similar skill, effort and responsibility . . .  performed under similar working conditions.” Therefore, to conduct self-evaluations, employers are going to need to understand the actual work that individuals are doing, and be able to compare such work across a wide variety of departments, job titles, and existing salary ranges. This means that companies will need to gather data and ask difficult questions of their Human Resources personnel, managers, and staff, to better understand the comparability of the work being done by their employees.

Moreover, employers will need to do more than complete self-evaluations. Companies also have to make reasonable progress toward fixing the problem. Employers who get a jump on the legislation will be able to proactively budget for pay adjustments they need to provide to their employees in order to eliminate the gender-based pay differentials.

The law also may also require some companies to change their cultures—and this might not be a simple fix. Companies will no longer be allowed to ask potential employees about salary history, and they will not be allowed to prohibit employees from discussing their salaries with coworkers. And of course, retaliation against employees who ask about salaries, and demand equal pay, will remain unlawful. With these changes, lawmakers sought to cut off patterns of sometimes unintentional discrimination; employers often make salary offers based on a potential employee’s salary history, but when that employee was underpaid in previous jobs due to her gender, the new offer may unintentionally perpetuate discriminatory wage disparities. Similarly, if employees are not allowed to discuss their salaries, they can’t identify, and ask to remedy, wage gaps. Companies may have to make cultural changes to implement the new laws. They may have to change the way they conduct hiring and salary negotiation processes. The law also is going to usher in more transparency about what employees are making relative to their coworkers. The more supportive companies are of these changes, the more likely their managers and employees—who have been used to an old way—are equipped to roll with the new expectations about how coworkers talk about pay and pay equality.

Whether or not companies start to prepare now, the law will go into effect and change is coming.  Employers can prepare themselves early, and by doing so, earn positive recognition for their efforts. For example, companies who have signed the White House Equal Pay Pledge have earned themselves positive support from the media and gender equality advocates. In Massachusetts, employers have an opportunity to be at the vanguard of an important movement to eliminate the wage gap. They should seize it.

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