A Closer Look at the AGO Guidance on Massachusetts’ New Pay Equity Law

By Kimberly A. Klimczuk - Skoler, Abbott & Presser, P.C.

March 6, 2018

As we announced in a Client Alert last week, the Attorney General has issued guidance on Massachusetts’ new pay equity law, which goes into effect on July 1, 2018. The new law, An Act to Establish Pay Equity, amends the Massachusetts Equal Pay Act (MEPA) and aims to reduce the pay gap between men and women by providing a broader definition of “comparable work” and by limiting the acceptable reasons for paying people of different genders differently.  It also prohibits employers from seeking information regarding the salary history of job applicants and provides an affirmative defense to employers who complete a “good faith” self-evaluation of their pay practices and demonstrate “reasonable progress” toward eliminating any wage differentials.

The guidance issued by the Attorney General’s Office, entitled “An Act to Establish Pay Equity: Overview and Frequently Asked Questions,” addresses a number of issues that have been raised since Governor Baker signed the law in 2016.  Specifically:

Discriminatory Intent is Irrelevant

Although the law was enacted to help remedy the effects of discrimination, employers can violate the law even if their pay decisions had nothing to do with gender discrimination.  As amended, MEPA now allows only six acceptable reasons for paying different wages to people of different genders: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production, sales, or revenue (such as piece work or sales commissions); (4) geographic location of the job; (5) education, training, and experience, to the extent such factors are reasonably related to the job in question; or (6) the amount of travel required for the job, if travel is a regular and necessary condition of the job.  If an employer pays employees of different genders differently for any other reason, the employer will have violated the law, no matter how good or nondiscriminatory that other reason may be.

The Law Applies to All Non-Federal Employers with MA Employees

There is no size threshold for MEPA.  The law applies to all non-federal employers with employees who primarily work in Massachusetts, regardless of size.  This includes state and municipal employers, as well as employers located outside of Massachusetts.  In addition, virtually all Massachusetts employees are covered by the law, including full-time, part-time, seasonal, per diem, and temporary employees.

An employee does not need to spend most of their working time in Massachusetts in order for Massachusetts to be the employee’s primary place of work.  Massachusetts may be the primary place of work for an employee who spends little or no time in Massachusetts if the employee 1) spends most of their time traveling outside of Massachusetts but regularly returns to a Massachusetts base of operations before resuming a new travel schedule; 2) telecommutes from another state to a Massachusetts worksite; or 3) works in several different locations but spends more time in Massachusetts than in any one other location.

The Guidance Helps Clarify Terms in the Law

The guidance document includes explanations and examples of terms used in the law, such as “comparable work,” “substantially similar,” “skill, effort, and responsibility,” “working conditions,” “physical surroundings and hazards,” and “wages.”  Most notably, but not surprisingly, the term “wages” includes all forms of compensation for work performed, including commissions, bonuses, profit sharing, paid personal time off, vacation and holiday pay, expense accounts, deferred compensation, car and gas allowances, retirement plans, insurance, and other benefits, regardless of whether they are paid directly to the employee or paid to a third party on the employee’s behalf.  The guidance also clarifies that, with respect to benefits, what matters is that employees have the same opportunity to participate in benefit programs.  So the fact that one employee elects to receive health insurance benefits and another doesn’t will not result in a violation of the law, as long as both employees had the same opportunity to elect the benefit.

The guidance also expands on what is required for a valid seniority system and merit system and when geography can justify a pay differential.  With respect to a merit system, the guidance makes it clear that variations based on employee performance must be “measured through legitimate, job-related criteria.”  This means employers should have a bona fide, documented performance review process in place if they want to take advantage of this pay variation justification.  In addition, the guidance states that the geographic locations in question must have different costs of living or in labor market differences that justify a variation in pay.  It also clarifies that commuting time is not considered “travel” for purposes of using travel to justify a discrepancy in pay.

Employers Can Still Pay Full-Time and Part-Time Employees Differently

A question we receive frequently is whether part-time and full-time employees performing comparable work must be offered the same effective hourly rate of pay or the same benefits.  The Attorney General’s guidance makes clear that “part-time and full-time employees may be paid different hourly rates, or offered different benefits, provided that employees of different genders within each category who perform comparable work are compensated at the same rate and offered the same benefits.”  The guidance also cautions against discriminatorily assigning part-time versus full-time work to a particular gender.

Employers Can Ask Applicants about Salary Requirements or Expectations

While the new law contains strict prohibitions against seeking the salary history of job applicants (including through a recruiting agency or any other entity acting on the employer’s behalf), employers can still ask applicants what their salary requirements or expectations are.  However, employers must be careful how they ask for and use the information – the questions about salary expectations may not be designed to obtain information about an applicant’s salary history, and an employee’s salary expectations cannot be used by the employer to justify paying someone more or less than someone of a different gender.

The Guidance Includes Helpful Information Regarding Employer Self-Evaluations

One of the most important parts of the new law is the affirmative defense established for employers who conduct good-faith self-evaluations of their pay practices prior to receiving a pay equity complaint.  The guidance explains that, to be eligible for the affirmative defense, an employer’s self-evaluation must be reasonable in detail and scope and must include the job that is the subject of the complaint.  In addition, if the self-evaluation revealed any wage disparities, the employer must show that it took reasonable progress toward eliminating those disparities, if the disparities could not be explained by one of the six justifications provided by the law.  The guidance explains that “reasonable progress” means that the employer took steps to eliminate the disparities in a reasonable amount of time, taking into account the size and resources of the employer.

The guidance includes a step-by-step guide for the self-evaluation process, but it also recommends that employers consult with legal counsel in connection with the self-evaluation to ensure that they are using the most appropriate analysis for their organization.  We agree.  In addition to assisting with the form of the analysis, your employment attorney can provide a legal opinion as to whether particular jobs are comparable under the amended Equal Pay Act and whether justifications for pay disparities meet the requirements of the new law.  Moreover, having an attorney involved in the self-evaluation means the evaluation will be protected by the attorney-client privilege, in which case an employer would only have to reveal the results of the self-evaluation if it wanted to.  Without this protection, an employer risks having its self-evaluation used as evidence against it if an employee files a claim.

Skoler Abbott attorney Kimberly Klimczuk will be presenting an educational seminar on the new Equal Pay Act on April 24, 2018 at Holy Cross College in Worcester.  If you are interested in attending the seminar or learning how Skoler Abbott can assist you with your self-evaluation, please e-mail Kimberly Klimczuk at kklimczuk@skoler-abbott.com.