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MEPA is coming: FAQs about compensation history ban

miller-and-masseyA new prohibition on requesting the compensation history of an applicant prior to making an offer of employment will take effect on July 1, as part of the legislative amendments to the Massachusetts Equal Pay Act.

Employers and their counsel may want to consider these 10 Frequently Asked Questions and the attorney general’s informal guidance about the law.

1. What does the law prohibit?

The law prohibits seeking the “wage or salary history” of a prospective employee from the prospective employee or a current or former employer, or requiring that the person’s prior wage or salary history meet certain criteria.

If an applicant has “voluntarily disclosed” the information, the employer may “confirm” it. The prospective employer may also seek or confirm salary history after making an offer of employment with compensation.

The attorney general has explained that questions about compensation “expectations” are permitted but employers “should proceed with caution when asking such questions and ensure that such questions are not framed or posed in a way that is intended to elicit information from the prospective employee about his or her salary or wage history,” e.g., “what is that expectation based on?”

Employers should carefully consider whether to ask any follow-up questions about compensation expectations that a candidate might interpret as connected to his or her compensation at a current or previous job.

2. Which employers are covered by the law?

All employers except the federal government are covered. “Employer” includes “any person acting in the interest of an employer directly or indirectly.” G.L.c. 149, §1.

The AG’s guidance provides that the law covers “nearly all employers in Massachusetts, including state and municipal employers, irrespective of size. It does not apply to the federal government as an employer.” It also explains that “MEPA’s prohibition on employers seeking the salary or wage history of prospective employees means that employers may not seek information on their own or through an agent (e.g., a recruiter or job placement service).”

As noted below, the law may also reach employers that are not based in Massachusetts but have employees in the commonwealth.

3. What should employers do now to get ready?

Employers should consider reviewing and revising their job applications and policies applicable to workers in Massachusetts to remove any questions about compensation history.

It is not clear whether a disclaimer (e.g., “Candidates for employment in Massachusetts need not respond to this question”) will be sufficient under the new law, and officials in some other jurisdictions with similar salary history bans, including New York City, have opined that such disclaimers are not sufficient.

The safest practice therefore is to eliminate questions on any such forms that will be completed by potential Massachusetts employees.

Employers also should consider training recruiters, managers and other employees involved in the hiring process. This training should include admonitions to such employees not to ask information about an applicant’s compensation history, and some employers may also want to arm their recruiting personnel with prophylactic disclaimers about any information that an applicant may voluntarily choose to provide.

4. How is wage or salary history defined?

“Wages” are defined as “all forms of remuneration for employment.” Salary history is not defined. Though not addressed, it likely does not include competing offers from other prospective employers or the applicant’s current employer because such offers are not wage or salary “history.”

5. What is the reach of the law, i.e., may employers ask about compensation history of a candidate who is applying for a job outside of Massachusetts or at an interview held outside of Massachusetts?

The statute does not address the extraterritorial reach of the law. The AG’s guidance takes the position that the law will apply to employees with a “primary place of work in Massachusetts,” regardless of where the employee lives. It explains: “For most employees, the location where they do most of their work for their employer is their primary place of work,” and provides five examples, including:

“1) If the employee spends work hours traveling outside Massachusetts (making deliveries, engaging in sales, etc.) but returns regularly to a Massachusetts base of operations before resuming a new travel schedule, Massachusetts is the primary place of work.

“2) If an employee is constantly switching locations of work, the primary place of work may be determined by assessing the state in which the employee spent the plurality of his or her working time over the previous year. For new employees, employers should make a reasonable assessment of the primary place of work.”

The guidance also explains:

“If it is possible that prospective employees will be chosen or assigned to work in Massachusetts (or to have Massachusetts as their primary place of work), employers should take care to ensure that they do not ask questions or seek information that violates MEPA. The fact that an employer initially was unsure where an employee would be located is not a defense to liability under the law.”

6. Does the law apply to applicants for internal transfer or promotion with their current employer?

No, according to the AG. However, the AG’s guidance reminds employers that “at no time will an employee’s salary history — with any employer — justify paying that employee less than an employee of a different gender who performs comparable work.”

This dynamic can create a trap for the unwary. It is a relatively common practice to maintain an employee’s rate of compensation when he or she is transferred (or even demoted) into a position that otherwise would pay less than the employee’s current position. If an employee’s historical compensation with the employer is not a valid defense under MEPA, then such transfers may create pay equity claims on behalf of all other employees of the opposite gender in the position to which the individual is transferred.

7. If an applicant volunteers information about compensation history, may an employer rely on it in setting compensation?

This is not addressed and is risky. The law allows employers to “confirm” salary history that is voluntarily disclosed and provides that an employee’s salary history is not a defense to an equal pay action. It does not address reliance on voluntary disclosures.

However, in response to an FAQ about publicly available information, the AG’s guidance explains: “[R]egardless of the source of the information, employers should keep in mind that at no time will an employee’s salary history justify paying that employee less than an employee of a different gender who performs comparable work.”

The circumstances in which it makes business sense to confirm salary history information provided by an employee may thus be quite limited.

8. May an employer search for publicly available information about compensation history?

Yes, but the employer may not rely on that information to justify differences in pay. As with the point about confirming salary history information noted above, this aspect of the law may undermine any reason that an employer would otherwise have for researching a candidate’s potential prior compensation.

9. May employers run background checks that include information about an applicant’s compensation history?

Yes, but only after an offer of employment with compensation has been made.

10. Is the salary history ban susceptible to legal challenge?

Yes, on the basis of violation of employers’ constitutional rights. In fact, the Chamber of Commerce for Greater Philadelphia filed a lawsuit in federal court challenging a similar salary history ban, arguing that the ban violates employers’ First Amendment and other rights by chilling their protected speech and impairing their ability to make hiring decisions. The Philadelphia law has been enjoined during the pendency of the lawsuit.

Barry J. Miller is a labor and employment partner at Seyfarth Shaw in Boston and member of the firm’s pay equity group. He can be contacted at bmiller@seyfarth.com. Hillary J. Massey is an associate in the firm’s labor and employment department. She can be contacted at hmassey@seyfarth.com.

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