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Employer-side lawyers parse RI pay equity law

Management-side employment attorneys are beginning to advise their clients on what they should expect under Rhode Island’s new “pay equity” law, which after years of previous efforts by legislators gained passage in the General Assembly’s most recent session and was enacted by Gov. Daniel J. McKee on July 6.

jewell“It’s really important for employers to recognize that this is for every protected class, which adds a layer of complexity. You’re not just looking at jobs and asking whether men and women are being paid equitably; you are looking at it from every angle.”

— Jessica Schachter Jewell, Providence

The act, with an effective date of Jan. 1, 2023, makes it unlawful for an employer to “pay any of its employees at a wage rate less than the rate paid to employees of another race, or color, or religion, sex, sexual orientation, gender identity or expression, disability, age, or country of ancestral origin” for “comparable work.”

“This bill is a true compromise,” said Providence lawyer Gregory M. Tumolo, who was involved in the talks that produced the final version of the legislation. “It reflects months of back and forth negotiations between the Working Families Party of Rhode Island on behalf of the bill sponsors and negotiators on behalf of the Rhode Island business community.”

Although the focus of the new law is often described as being geared toward pay equity for women, the statutory language makes clear that its reach is much broader, prohibiting pay differentials based on any legally protected class, unless the employer can satisfy one of several exceptions.

“It’s really important for employers to recognize that this is for every protected class, which adds a layer of complexity,” said Jessica Schachter Jewell of Providence. “You’re not just looking at jobs and asking whether men and women are being paid equitably; you are looking at it from every angle. It’s important work for any employer to be doing, and it’s a great opportunity to rectify any issues that arise during the self-evaluation specified in the statute.”

Alicia J. Samolis is recommending that her employer clients look at the issue from a different perspective.

“As a conceptual matter, don’t think of this as a discrimination law. Forget about ‘protected class’ status. Every single employee is of a gender, race and sexual orientation. Instead, think of it as a law limiting the factors an employer can consider when setting wages,” Samolis said.

Timothy C. Cavazza said the new law may not presently be at the top of many employers’ minds considering its 2023 effective date.

cavazza-timothy-web“Over the next 18 months there are absolute steps that will need to be taken by every employer.”

— Timothy C. Cavazza, Providence

“But over the next 18 months there are absolute steps that will need to be taken by every employer, and they will need to take a close look at the statute with the purpose of trying to determine any vulnerabilities they may have in their hiring and pay practices,” the Providence attorney said.

Statutory interpretation

The statute permits wage differentials in several circumstances, such as those based on seniority, merit or job-related education.

On that front, Samolis said, the statute’s “catch-all” exception allowing for differentials for any nondiscriminatory reason that it is “job-related to the position” and “consistent with business necessity” may prove problematic.

“How exactly the catch-all will be interpreted by the future regulations and guidance is very significant,” said Samolis, who practices in Providence. “What is not clear is whether the requirement of being ‘job-related’ and ‘consistent with business necessity’ will be a broad concept similar to a ‘sound business reason’ or whether it will be narrowly interpreted to require the reason not to relate to individual factors or the circumstances of the particular hire.”

A broad reading of the exception would “decrease the significance of the law drastically,” according to Samolis, with a plaintiff’s attorney not wanting to incur the cost of demonstrating the existence of a cost-effective alternative business practice that serves the same purpose without creating a wage difference.

As for another potentially fraught term, Tumolo said the “comparable work” standard is an aspect of the statute that “almost invites litigation.”

“I think there will be a lot of litigation over the term ‘comparable work,’” agreed Cavazza. “We’ve already seen litigation where it exists in other pay equity statutes. But its meaning is going to vary from employer to employer. There is no cookie-cutter job description or formula to determine comparability.”

Jewell said the “comparable work” concept may seem somewhat simple at first, but perhaps not in practice.

“There are going to be many factors that an employer is going to have to consider. Do the job descriptions actually match the work being done? Do you look across departments? Do you look across multiple locations?” she asked. “The good news is that if a business does this once and does it correctly, and then keeps up with best practices and stays in line with what their evaluation showed them, the ‘heavy lift’ will be at the beginning, and hopefully it will just be maintenance going forward.”

‘Safe harbor’ self-evaluation

Among the equity legislation’s hallmark provisions is a “safe harbor provision.”

According to Tumolo, any employer against whom a claim is asserted will have an affirmative defense to liability if the business is able to demonstrate it conducted a good faith self-evaluation of pay practices within the previous two years and prior to the commencement of litigation, and can further show that any unlawful pay differential identified by that audit has been eliminated.

While employers can easily plan for some aspects of the new law, such as ensuring compliance with workplace postings and the prohibition on seeking applicants’ wage histories, Cavazza said an employer’s decision on whether to conduct the self-audit is another facet of the law that will require a “detailed, individualized assessment.”

“It doesn’t come without costs, and it doesn’t come without risks,” he said.

Some employers’ pay practices are already compliant with the statute, Cavazza pointed out, with larger employers more likely to need an audit. But he stressed that those opting to self-audit should not do so blindly.

“It’s important to wait to see if the Department of Labor is going to promulgate regulations that might shed some light on what these audits are going to look like,” he said. “Employers should read the statute, wait for the regulations, and approach the task with professionals such as an HR staff and labor attorneys to the extent necessary. You might even need to bring in CPAs depending on the size and nature of the business.”

Jewell concurred that employers may want to consider hiring outside counsel or other consultants to assist in the process.

“We saw a lot of that taking place in Massachusetts a few years back when they passed their equity law,” she said. “Because employers want to get this right, it is certainly something that should be taken seriously and should be done correctly so that they can both remedy the inequities and also get the benefit of the affirmative defense.”

Employers should partner with legal counsel when conducting self-evaluations to ensure that the resulting work product and any communications regarding unlawful pay differentials are privileged, Tumolo said.

Samolis is advising employers to undergo the audit to try to limit damages if a claim does arise.

“Existing employees [should] identify positions with similar skill, effort, responsibility and work conditions,” she said. “For categories of jobs where there are pay differences that will not fall into an enumerated reason and which are not likely to fall within the catch-all, no matter how it is defined, address those issues or implement plans on how to address the issues prior to Jan. 1, 2023.”

Wage history, ranges

The law imposes new limitations in an employer’s use of wage history information prior to making offers of employment and additionally requires employers to provide a position’s wage range to applicants and employees upon their request.

“Wage history can’t be a reason that an employer treats someone differently,” Jewell said. “Women are less likely to negotiate for higher pay than men, and the idea behind the wage history prohibition and wage transparency requirement is to even the playing field for individuals who are negotiating for wages or salary with an employer.”

She will ask her business clients to examine their policies and practices to make sure that they are compliant with every aspect of the law, not just the self-evaluation provision, which has attracted the most attention.

“They have to be thinking about other things like applications and ensuring that hiring managers and everyone down the line know what this law entails,” Jewell added.

As for wage ranges, Tumolo said many employers don’t maintain them for each position, so he is recommending that his clients use the period before the act’s effective date to develop them.

Samolis is concerned that “wage range” is vaguely defined under the statute, but “may” include a reference to a pay scale, a previously determined range, the range of those holding the position, amounts budgeted for the position, or wages for incumbents in equivalent positions.

“As long as the regulations do not become more specific and require reference to one or more of those things, or prohibit pay outside the range given, then this likely will not be too problematic, as essentially the employer can give a large range on what it expects to subjectively pay for a position and then set the actual salary at whatever amount is needed,” she explained.

On the other hand, Samolis said, there could be a “more significant impact” on business operations if the regs make the requirements more specific.

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