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New Pay Equity Law Brings Big Changes for Employers

On August 1, 2016, Governor Charlie Baker signed a new law aimed toward closing the wage gap in Massachusetts.  The Pay Equity Act, which is a comprehensive act that broadens an employee’s ability to recover while also providing employers with a way to limit their exposure, will go into effect in 2018.  

The law contains three main provisions.  First, it prohibits discrimination on the basis of gender in the payment for comparable work unless the difference is based on one of the statute’s enumerated exceptions.  Some exceptions include seniority, education, experience, training, or a bona fide merit system.  The law also redefines comparable work as “work that is substantially similar in that it requires substantially similar skill, effort, responsibility and is performed under similar working conditions.” This will replace the current two-part analysis used by the Court which most critics found to too narrowly limit an employee’s ability to prevail on a pay equity claim. 

The second provision prevents employers from asking job applicants about their previous salary history during the interview process.  The law also bars employers from screening potential employees based on wage or salary history, and forbids employers from requiring that potential employees disclose this information as part of the application process.  An exemption allows an employer to ask about salary history after a formal offer that includes compensation has been made.   An employer cannot be held liable if the prospective employee volunteers his or her salary history.  The goal of this provision is to require employers to base salaries on their own objective standards and not on employees’ prior salaries.  Proponents of the new law argue that that practice limited a woman’s earning capacity throughout her lifetime, as women have historically been paid less than their male peers for the same work. 

The third provision explicitly permits employees to discuss their salaries openly with each other.  Many employers prohibit this practice even though it violates the National Labor Relation Act (for those of whom are covered by it). President Obama issued an executive order barring this practice for federal contractors.  By allowing employees to discuss their salaries openly, the law will help individuals confirm that they are being paid equitably compared to their peers and facilitate opportunities for future salary negotiation if that is not the case.

The law also provides employers with an incentive to evaluate their own practice when it comes to pay equity.  The law provides an affirmative defense for any employer who, within the previous three years, has completed a self-evaluation of its pay practices and, in good faith, can demonstrate reasonable steps have been made to eliminate gender pay differentials for comparable work.  The Attorney General’s office is expected to release forms and templates to aid employers with their self-evaluations.  

The Pay Equity Act also provides potential plaintiffs with a longer statute of limitations than most discrimination claims.  Under the new law, an employee will have three years to bring a claim from the date of the alleged violation and every “discriminatory paycheck” is deemed a violation.  The law also does not require an employee to file a discrimination claim with the Massachusetts Commission Against Discrimination prior to filing a lawsuit.

Recently, Melick & Porter associate Erinn Gloster was interviewed by NBC Nightly News regarding the new law and its effect on the application process for prospective employees.  Please click here to view Erinn’s interview.  If you have any questions about the new law and how it may impact your company, or have questions about your current policies for employees, please do not hesitate to contact us.