Massachusetts Attorney General Issues Guidance on New Equal Pay Law
On March 1, 2018, the Massachusetts Attorney General (AG) issued detailed guidance on the amendments to the Massachusetts Equal Pay Act (MEPA), which are set to go into effect on July 1, 2018. The amendments, which were enacted in 2016, will overhaul MEPA, a law that has been in effect for over 70 years, and make it one of the strictest pay equity laws in the nation. Structured primarily in a question-and-answer format, the new guidance answers many of the important questions employers have been asking since the enactment of the amendments. This article will highlight some of the most significant issues addressed in the new guidance.
By way of background, some of the key changes in MEPA amendments include
- broadening the prohibition against differences in pay on the basis of gender to “comparable” work requiring substantially similar skill, effort, and responsibility under similar working conditions, thus eliminating the requirement that the job have comparable content;
- providing new, but relatively narrow, defenses that allow pay variations based on (i) seniority with the employer; (ii) merit; (iii) quantity or quality of production, sales, or revenue; (iv) geographic location; (v) education, training, or experience, if related to the job at issue; or (vi) travel, if a regular and necessary part of the job;
- prohibiting an employer’s use of an employee’s previous wage or salary history as a defense to a claim;
- prohibiting employers from asking applicants for their prior salary histories;
- creating a new affirmative defense to a claim under the act if an employer completed a self-evaluation of its pay practices in good faith in the prior three years and can demonstrate that it has made “reasonable progress” toward eliminating gender-based wage differentials; and
- expanding the statute of limitations.
For a detailed discussion of the MEPA amendments, see our 2016 article, “A Closer Look at Massachusetts’s Pay Equity Law.”
The guidance seeks to provide direction to employers and employees on the scope and meaning of the law, and addresses a number of issues about which the employer community has long sought clarity.
- The guidance provides that the new law will apply to employees who work outside of Massachusetts, but only if Massachusetts is their “primary place of work,” which the AG states is the place where “most” of their work is performed. Notably, there is no specific mathematical test, and an employee need not spend 50 percent of his or her working time in Massachusetts for it to be the primary place of work. The definition of “primary place of work” is substantially identical to the definition the AG used in the Massachusetts Earned Sick Time regulations.
- The guidance suggests that in determining whether a pay disparity exists, multistate employers may need to compare the wages of out-of-state employees with Massachusetts employees’ wages if the only comparators are located out of state. (The guidance notes that geographic location might justify pay discrepancies.)
- With regard to the prohibition on prior salary history, multistate employers must comply with that prohibition if there is a possibility the employee will work in Massachusetts. According to the AG, this is true even if the employer is initially unsure if the applicant will work in Massachusetts.
The guidance makes clear that the AG’s enforcement position is that the amendments substantially broaden MEPA’s coverage. Given this, employers will likely find that determining whether pay discrepancies based on gender exist between “comparable” positions will be substantially more challenging. For example, the guidance provides the following:
- “Comparable work” is broader and more inclusive than the “equal work” standard under the federal Equal Pay Act.
- Specific job content is no longer determinative. Rather, comparable work may exist where the skill required for the jobs is similar, even though the jobs themselves seem different, such as an elementary school janitor job and an elementary school food service worker position.
- Job descriptions themselves will not be considered determinative of whether jobs are comparable, although accurate job descriptions will be useful in making that determination.
Definition of “Wages”
The term “wages” under the new law will be very broad. The guidance makes clear that wages are considered to be any form of remuneration, in whatever form, and not only base salary or hourly wages. Thus, wages include
- incentive pay, such as commissions, bonuses, profit sharing, and production incentives;
- vacation and holiday pay;
- paid time off;
- expense accounts;
- car and gas allowances;
- benefits of any nature (e.g., health or life insurance, retirement plans, or tuition reimbursement), even if employees may choose not to participate in such plans; and
- deferred compensation.
It is unclear, however, whether stock options or other forms of equity are covered.
Variations in Pay
As discussed above, MEPA allows for six specific defenses to a claim of pay disparity for comparable work. However, the law expressly excludes an employee’s prior salary history as a defense to a pay disparity claim. The guidance provides further explanation of the defenses:
- Unlike the federal Equal Pay Act, there is no “factor other than sex” defense, eliminating many common defenses such as market forces;
- Seniority, which can be a defense to a pay disparity, is defined as “a system that recognizes and compensates employees based on length of service with the employer,” though any time spent on “protected parental, family and medical leave” may not be excluded for purposes of determining seniority. Notably, this interpretation of “protected parental, family and medical leave” (which means leave protected under statutes such as the federal Family and Medical Leave Act, the Massachusetts Parental Leave Act, Massachusetts Pregnant Workers Fairness Act, Massachusetts Small Necessities Leave Act, and the Massachusetts Domestic Violence Leave Law) is contrary to the provisions of many of these laws, which provide that leave taken pursuant to the laws need not be included for purposes of seniority; education, training, or experience can justify a pay disparity if reasonably related to the job. The guidance indicates that a pay disparity will be viewed as permissible if a reasonable employer determined, at the time the wages were established, that such education, training, or experience would help the employee perform the job more efficiently or effectively.
- Changes in the labor market or other market forces do not justify paying employees of one gender less than employees of a different gender if they perform comparable work. Thus, according to the guidance, it will not be a defense that an employer pays an employee of one gender more than an employee of another, even if a shortage of workers with a specific skill set caused the discrepancy.
Restrictions on Seeking Salary History
One of the most significant changes in the law is the new prohibition on seeking the salary history of a prospective employee. This provision is fairly unique nationally and is intended to eliminate any salary discrimination that may have occurred in the past. The guidance has several notable provisions:
- Internal employees who apply for transfers or promotions are not covered by this provision as the employer already has the information and therefore need not “seek” it.
- Employers are explicitly allowed to ask prospective employees about salary requirements or expectations. The guidance does, however, caution employers that they should not ask questions that are intended to prompt prospective employees to disclose wage histories.
- Employers may ask applicants about matters such as sales performance and whether targets were met at prior employers, as long as the inquiries do not seek information about earnings based on those sales.
The MEPA amendments provide a very important change in the affirmative defenses available to employers. A complete defense to a claim will be available if an employer conducted a “good faith,” reasonable self-evaluation of its pay practices within the previous three years and prior to an action being filed against it, and the employer can show reasonable progress toward eliminating any unlawful gender-based wage differentials revealed by the self-evaluation. A partial defense to liquidated damages claims may be asserted if such an evaluation was conducted but was not reasonable in scope or detail. The guidance on this defense includes several notable items:
- A new calculator tool intended to help employers determine whether a disparity exists is available for download. (See page 21 of the guidance.)
- The definition of “reasonable progress toward eliminating pay disparities” states that an employer must take “meaningful steps” toward eliminating a disparity. Whether those steps are reasonable will be measured against the amount of time that has passed, the nature and degree of the progress as compared to the scope of the identified disparities, and the size and resources of the employer.
- Eliminating pay disparities does not require retroactive payments, only adjusting salaries on a going-forward basis. Employers cannot, however, reduce the salaries of employees to comply with the law.
Checklists and Additional Guidance
The guidance also provides two appendices that provide a helpful guide for employers on how to conduct self-evaluations and a checklist for reviewing policies and practices.
The guidance provides helpful information on the AG’s enforcement position with regard to MEPA, although certain of the positions are far less employer friendly than employers had hoped. Employers should become very familiar with these developments and take them into account in seeking to comply with the new law. Employers still have time to comply and conduct self-evaluations.