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Pay equity law: what lawyers and employers need to know

More than 70 years ago, Massachusetts passed a law requiring employers to pay men and women the same wages for “comparable work,” making it the first state in the nation to pass such a law. Over the years, however, a pay gap between men and women has persisted.

Earlier this month, Gov. Charlie Baker signed into law a bill intended to close the pay gap after the bill was passed unanimously by the Massachusetts Senate and House.

Although the new law doesn’t take effect until July 1, 2018, it’s important for attorneys and employers to take the time now to understand the law’s key provisions, listen to what opponents and proponents have said about it, and consider the law’s implications for employers in Massachusetts.

Key provisions for attorneys, employers

While pay equity legislation is not new in Massachusetts, this legislation clarifies the existing statute and puts restrictions on employers to make the law more effective.

Most notably, the law clarifies the definition of comparable work, which courts have defined fairly narrowly over the years. Once the new law is in effect, comparable work will be defined in a broader sense, which supporters hope will ensure that similar jobs have similar pay, regardless of the employee’s gender.

In what supporters have called a first-in-the-nation provision, the law also stipulates that employers are not allowed to ask job applicants about their current salary or their salary history. Prohibiting employers from asking about salary history forces them to set wages based on job requirements, not previous salary.

In addition, the law states that employees must be permitted to discuss their salaries openly with their colleagues. This has arguably already been the case, since employers can’t restrict employees from discussing their wages due to the positions of the National Labor Relations Board. The provision, however, gives employees yet another forum to pursue relief if employers restrict these conversations.

Although the above provisions place regulations on employers, the law will also enact a welcome change, as it encourages employers to conduct self-audits, which can help uncover inadvertent pay disparities. Making good-faith efforts to correct pay disparities revealed through the audit process acts as an affirmative defense for employers to any litigation that might be filed against them.

Most employment attorneys would recommend that employers conduct these audits to determine if employees are correctly classified as exempt or non-exempt; ensure compliance with state and federal law, including the Department of Labor’s new overtime regulations; and correct any inadvertent disparity in pay.

Employers in the financial sector, and in industries all across Massachusetts, will need to take a closer look at their payroll practices to ensure there are no pay disparities for comparable work.

Listening to proponents, opponents

In shaping this new law, members of the Massachusetts Senate and House have considered the opinions of both proponents and opponents of the legislation. Now that the bill has become law, it’s important to consider the context in which the legislation was crafted.

Proponents are quick to point out that even though Massachusetts has been at the forefront of passing equal pay legislation, it hasn’t always been effective. A study by the National Partnership for Women & Families indicates that women working full time in Massachusetts make 82 cents for every dollar men make. On average, Massachusetts women working full time lose a combined total of more than $11 billion each year due to the pay gap, according to the study. Proponents of the new law want that pay gap to narrow as much as possible.

Opponents, on the other hand, believe that existing laws already prevent pay disparity, and they worry that the new law does not afford employers sufficient discretion to make pay decisions based on subtle but important differences in employee performance and work product.

Opponents also worry that the new law will cause an increase in litigation. The law gives the attorney general the right to initiate a cause of action against an employer on behalf of employees and gives employees the right to initiate a private right of action.

Many employers already view Massachusetts’s treble damages for wage and hour violations — even when an employer exercises good faith — to be particularly punitive.

What the future holds

While this law will have implications for employers in a variety of industries, the financial industry may be among the sectors most affected.

That industry, which has seen its fair share of gender discrimination claims on a national level, is a key component of the business community in Massachusetts. Some lawsuits filed against financial companies paint a picture of a largely male-dominated culture that has, at times, encouraged disparity. As a result, the financial industry may be an attractive target for pay disparity litigation.

Employers in the financial sector, and in industries all across the state, will need to take a closer look at their payroll practices to ensure there are no pay disparities for comparable work.  As Massachusetts continues its leadership in pay equity, all employers will need to make sure their policies follow suit.

Christina L. Lewis is a partner at Hinckley Allen and the practice group leader for the firm’s labor and employment group. 

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