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Employers keep close eye on pay equity push

Mass. AG’s Office sends sweeping demand letters

miller, barrryA state law mandating gender pay equity that has been on the books for more than 70 years has generated few cases, but the issue is increasingly top of mind for employment lawyers in Massachusetts.

Attorneys are watching two recent developments that lay a foundation for more pay equity lawsuits.

The first: a flurry of demand letters being sent out by the Attorney General’s Office that seek extensive demographic and payroll information from private employers. The letters cite the AG’s authority under the Massachusetts Equal Pay Act, which dates back to 1945.

“It’s an unprecedented and expansive request for records,” Boston employment lawyer Christina L. Lewis said of the AG’s letter campaign.

The other development on the employment bar’s radar screen: “An Act to Establish Pay Equity,” a new bill that would lower the threshold for litigation on claims. The measure, which unanimously breezed through the state Senate on Jan. 28, has management-side lawyers on alert.

“If it were the law, not only would it cause more litigation but it would cause significant issues for companies to understand what their obligations are,” said James W. Bucking of Boston.

Data on race, ethnicity

The demand letters emphasize the AG’s authority to determine compliance with MEPA and the Minimum Fair Wages Law, including inspecting payroll records and investigating wages.

The letters ask for a wide range of information about the target companies’ Massachusetts employees, including: name; address; sex; race or ethnicity; whether the employee is part time or full time; the worker’s employee status; hire date; current title or position; start date in the current job; current salary; work location; total compensation for the last year broken down in several ways; and job description.

The missives are different in scope than the audit letters employers’ typically receive, Lewis said. The recent wave asks for more demographic and job description details and seems to be aimed at determining whether employees of different gender and race experience pay disparities, she said.

The effort of the AG’s Office is notable because employers that are not the subject of a complaint by an individual or an allegation of unequal pay are receiving the letters, Boston employment lawyer Daniel B. Klein said.

“It seems to be a sudden new agenda item for the attorney general,” Klein said.

In response, there’s been a marked uptick in client requests for pay equity audits, according to Barry J. Miller, who practices with Klein. Such audits are a new frontier for many companies, he added.

“Any time you collect that much data about your employees and start sending it out of the organization, it raises all kinds of issues about confidentiality of the data and data breach [risks]. It’s not a small set of concerns for any employer who receives one of these requests,” Miller said, noting that employers will have to decide how much information to gather and release.

The Minimum Fair Wages Law, which has been the basis for other recent requests from the AG’s Office, requires employers only to keep records of an employee’s name, address, occupation, amount of compensation and hours of work, Miller said.

“The information they are requesting [now] is broader than any statute that has been proposed or that is on the books. They’re asking for data about race and ethnicity,” Miller said.

Until this year, Boston lawyer Stephen T. Melnick said he has devoted little time to matters involving MEPA. The law historically has not attracted much attention from the plaintiffs’ bar or the attorney general, and as a result there has been a staggering difference between the small number of MEPA cases on the books and the vast number of Massachusetts Wage Act suits.

Melnick sees the issue gaining momentum across the United States. California and New York, for example, have pay equity laws that took effect this year. Last month, the U.S. Equal Employment Opportunity Commission proposed revising reporting requirements for companies with more than 100 workers. The agency currently mandates that employers report data about race, ethnicity and gender in various job categories. In its efforts to combat pay discrimination, the EEOC is considering requiring that employers include data about pay ranges and hours worked as part of the mandatory reporting process.

“People are seeing this as both a rising tide of concern at the government level and, soon enough, at the plaintiffs’ bar level,” Melnick said.

Meanwhile, like Miller, Melnick said a “steadily increasing” number of his firm’s clients are requesting pay equity audits after receiving the AG’s letter.

Although some practitioners think the recent demand letters are an effort to gather information for the legislative process, Bucking said he is advising clients to treat them as seriously as any other enforcement action.

“My sense is that, with or without new legislation, there will be an increased emphasis on this. The political climate will result in a greater enforcement of the existing law even if no new law is passed,” he said.

The AG’s Office would not confirm or deny whether it is conducting an official investigation into pay equity in Massachusetts. In a written statement, press secretary Jillian Fennimore said AG Maura T. Healey “has made this issue a priority and wants to ensure that women are being paid fairly and equally.”

The statement went on to say that while Massachusetts became the first state to pass an equal pay law more than 70 years ago, “the pay gap remains real and persistent. On average, women in Massachusetts still only earn 81 percent of what men earn, and for women of color the wage gap is even larger.”

Behind the scenes

Working with the AG’s Office, both the plaintiffs’ and defense bars have had opportunities to weigh in on the pay equity measure that received the Senate’s unanimous support.

David B. Wilson, a management-side employment attorney in Boston, said he was part of a group of defense lawyers that met with the AG’s Office to discuss pay equity legislation. The group took issue with an earlier proposal that failed to give employers an opportunity to explain differences in pay, and it pushed for a safe harbor for employers that conduct their own pay equity audit, he said.

“They came up with something that was going to turn the law into a machine for litigation against almost all employers,” Wilson said. “We pushed back.”

Language in the new bill provides an affirmative defense for any employer that audited its own pay practices within the prior three years and before the start of the case against the company. The language also requires the employer to prove that “reasonable progress has been made towards eliminating compensation differentials based on gender for comparable work.”

The safe harbor also would apply to pay discrimination claims under Chapter 151B, the anti-discrimination statute.

There is still plenty of language in the current bill that favors plaintiffs’ concerns. It would extend the statute of limitations for filing complaints from one to three years, which makes it consistent with the state’s anti-discrimination law, said Nina J. Kimball, a plaintiffs’-side employment lawyer who co-chairs the Women’s Bar Association Task Force on Pay Equity.

The bill’s clarification of what comparable work means is critical, Kimball said. The legislation states that comparable work requires similar skill, effort and responsibility and involves similar working conditions, but “a job title or job description alone shall not determine comparability.”

Though Kimball expects more litigation should the bill become law, she does not foresee an opening of the proverbial floodgates. The pay transparency provision, which would prohibit employers from disciplining employees who discuss their wages with co-workers, could actually reduce some litigation, she explained, noting that many companies now have confidentiality provisions that ban such discussions.

“Pay transparency allows people to get information about wages so they can advocate for equal pay without having to file a lawsuit to get the information” Kimball said.

Lawyers cite companion Supreme Judicial Court rulings issued in 1995 and 1998, Jancey v. School Committee of Everett, that essentially gutted MEPA.

“They made the standard for comparable work not really comparable — more just equal pay for equal work. They made it nothing more than what the federal law provides,” Kimball said.

In its 1995 Jancey ruling, the SJC vacated and remanded a Superior Court judgment for female cafeteria workers who sued the Everett School Committee because they were paid lower wages than male custodians. The trial judge held that the overall work was comparable.

However, the SJC ruled that the statute required a two-part analysis. First, the judge must determine whether the duties of the two jobs have key common characteristics. Next, the judge must determine whether the jobs involve comparable skill, effort, responsibility and working conditions.

On remand, the Superior Court judge issued a judgment for the defendant because the substantive content of the jobs were dissimilar. The SJC affirmed in 1998.

The current pay equity bill lowers the threshold for finding violations because it eliminates of the SJC’s test for substantive comparability, Melnick said.

The bill offers a new standard for comparable work, and “that’s necessarily going to mean there’s a greater potential for government enforcement or a private claim,” Bucking said.

It also will create burdens for companies because they will need to figure out which jobs should receive the same salary, he said.

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