On March 1, 2018, the Massachusetts Attorney General’s Office published guidance on the amendments to the Massachusetts Equal Pay Act (MEPA), as described below.
By way of background, the amendments, signed into law in 2016 and effective July 1, 2018, seeks to ensure that men and women are paid equal wages for comparable work. In sum, MEPA broadens the definition of comparable work, describes the limited circumstances in which variations in pay may be permissible, and prohibits employers from restricting discussions of wages or from seeking salary history from applicants. Importantly, MEPA provides employers with an affirmative defense against pay disparities if they have completed a good faith self-evaluation of its pay practices and can show that they have made reasonable progress towards remedying pay differentials.
The Guidance, titled “An Act to Establish Pay Equity: Overview and Frequently Asked Questions,” seek to provide employers with clarification around key issues including:
- Who is covered by MEPA;
- What is “comparable work” and what constitutes “wages;”
- What are permissible variations in pay;
- Other protections;
- Liability and enforcement; and
- Under what circumstances may an employer self-evaluation be used as an affirmative defense.
The Guidance also include three appendices: (1) a basic guide for employers who choose to undertake a self-evaluation for purposes of asserting an affirmative defense under MEPA, a downloadable pay calculation tool for small employers, (2) a sample checklist to guide employers in conducting a review of their existing policies and practices, and (3) a copy of the Act to Establish Pay Equity, as enacted.
Who is Covered by MEPA. Nearly all Massachusetts employers are covered under MEPA. Out-of-state employers are also covered, if they have employees with a primary place of work in Massachusetts. Massachusetts is considered to be an employee’s primary place of employment if he or she telecommutes to a Massachusetts worksite even if he or she does not physically spend those telecommuting hours in Massachusetts.
What is Comparable Work? “Comparable work” is work that requires substantially similar skill, effort, and responsibility, and is performed under similar working conditions. “Substantially similar” means that each factor (skill, effort and responsibility) are alike to a great or significant extent. Importantly, skills must be measured in terms of the performance requirements of a job and not in terms of the skills that an employee happens to have. “Working conditions” include the environmental and physical surroundings of the job, as well as any hazards that may be encountered by employees performing the job.
What is included in Wages? “Wages” is defined broadly, and includes all forms of compensation for work performed, including all forms of incentive pay (e.g., commissions, bonuses, and profit sharing), paid time off, expense reimbursement, retirement plans, insurance, and other benefits paid to or on behalf of an employee.
What are Permissible Variations in Pay? An employer may pay different wages to employees of different genders who perform comparable work only when based on the following:
- a system that rewards seniority with the employer (provided, however, that time spent on certain protected leaves of absence shall not reduce seniority);
- a merit system;
- a system which measures earnings by quantity or quality of production, sales, or revenue;
- the geographic location in which a job is performed;
- education, training or experience to the extent such factors are reasonably related to the particular job in question; or
- travel, if the travel is a regular and necessary condition of the particular job.
Salary history is not a legitimate factor that would justify a pay disparity under MEPA. Further, changes in the labor market or other market forces cannot be used to justify a pay disparity.
Other Protections. Employers may not restrict employees’ discussions about their wages, except that an employer may prohibit human resources employees, supervisors, or other employees whose job responsibilities give them access to other employees’ compensation information from discussion other employees’ wages. Employers may not seek salary history from a prospective employee unless the employer is seeking to confirm information voluntarily shared by the candidate or after an offer of employment with specified compensation has been made to the candidate.
Liability and Enforcement. An employer that violates MEPA generally will be liable for twice the amount of the differential between the employee’s wages and the wages paid to an employee of a different gender performing comparable work, plus reasonable attorneys’ fees and costs. Employers found to have violated of other provisions of MEPA, such as the anti-retaliation provision, may also be required to pay actual damages incurred. An employee or applicant who believes his or her rights have been violated may file a claim in court within three years from the date of the alleged violation. An employee may, but is not required, to file a claim with the Attorney General’s Office or the Massachusetts Commission Against Discrimination before filing suit in court.
Affirmative Defense for Employer Self-Evaluations. MEPA provides a complete defense to a legal claim for any employer that has conducted a good faith, reasonable self-evaluation of its pay practices within the previous three years and before an action is filed against it. To be eligible for this affirmative defense, the self-evaluation must be reasonable in detail and scope and the employer must also show reasonable progress towards eliminating any unlawful gender-based wage differentials that its self-evaluation reveals. A “good faith” self-evaluation is one that an employer conducts in a genuine attempt to analyze comparable jobs and to identify any unlawful pay disparities.
Whether a self-evaluation is “reasonable in detail and scope” will depend on the size and complexity of the workforce, but must take into account a reasonable number of jobs and employees and all reasonably relevant and available information, and must be reasonably sophisticated in its analysis. A determination of whether an employer has made “reasonable progress” towards eliminating pay disparities will depend on how much time has passed since the employer identified unlawful pay disparities through its self-evaluation, the nature and degree of progress as compared to the scope of the identified disparities, and the employer’s size and resources.
Importantly, evidence that an employer has conducted a self-evaluation or taken remedial steps as a result is not admissible in court to show a violation of MEPA or the Massachusetts anti-discrimination law, Massachusetts General Law Chapter 151B, in certain specified circumstances.
A Basic Guide to Self-Evaluations. The Guidance include three appendices, the first of which is a basic guide for employer self-evaluations (the second is a checklist to guide employers in conducting a review of their existing policies and practices and the third is a copy of MEPA). The Basic Guide for employers begins by explaining that whether a self-evaluation is “reasonable in scope and details” will be based on the employer’s individual circumstances; what is reasonable for a small, simply organized employer will be different than what is reasonable for a large, complex organization with significantly greater resources. The Basic Guide goes on to describe six steps that together will form the basis of a self-evaluation that is “reasonable in scope and detail.”
- Step 1: Gather Relevant Information. The recommended information to be collected includes, but is not necessarily limited to, twenty-three different data points for each current and former employee for the past year. These data points include both basic and detailed information about each employee and his or her compensation.
- Step 2: Identify Comparable Jobs. To identify comparable jobs, employers should create job groupings based on the skill, effort, and responsibility required to perform the job, taking into account working conditions, hazards encountered, and shift worked. Comparable jobs may be found within or across business units or departments.
- Step 3: Calculate Whether Men and Women are Paid Equally. Employers must then calculate whether men and women are paid equally within comparable jobs. There is no specified manner in which this calculation must be done, although the Basic Guide recommends the following:
- For an organization with small, clearly defined groups of comparable jobs and a relatively simple pay structure, the employer may compare the average wages earned by men and women in comparable jobs. The Basic Guide provides a AGO Pay Calculation Tool and instructions for its use to help with this simple analysis.
- When the number of employees in a particular group exceeds thirty, or where the pay structure is complex, a more detailed analysis likely is necessary. Although the Basic Guide does not require employers to conduct a statistical (multiple regression) analysis, it is recommended.
- Employers should also consider conducting one-to-one comparisons within the same comparable job grouping; according to the Basic Guide, “each male employee within a comparable job grouping is a potential comparator for the female employees, and it is not sufficient to compare a female employee to the ’average’ comparable male.”
- Step 4: Assess Whether Differences in Pay are Justified Under the Law. Here again, the Basic Guide recommends a different approach for small and large organizations.
- For small comparable job groupings (those with up to thirty employees), the Basic Guide recommends that employers look at similarly-situated male and female employees within each group to assess whether any differentials in pay are explained by these permissible factors.
- For larger job groupings, the Basic Guide recommends that employers conduct a multi-variable regression analysis.
- Step 5: Remediate any Gender-Based Pay Differentials. The Basic Guide recommend that employers develop a remedial plan as soon as practicable upon completion of the self-evaluation. Importantly, If an employer waits longer than six months to take remedial action, it risks having the self-evaluation used as evidence against it if an employee files a claim. Further, an employer may not reduce the wages of any employee solely to comply with MEPA.
- Step 6: Adjust Pay Practices. Employers that identify unjustified pay differentials should try to determine the reasons for any such differentials and to adjust pay practices accordingly. To this end, Appendix 2 to the Guidance is a checklist, which employers may use to review and modify its policies and practices relative to MEPA.
For questions or more detailed information on steps you can take to comply with these significant changes, please feel free to contact us directly.