HIGHLIGHTS:
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The Massachusetts Attorney General's Office issued guidance on the amended Massachusetts Equal Pay Act (MEPA), which takes effect July 1, 2018, and mandates equal pay among employees of different genders performing comparable work.
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The attorney general's overall guidance provisions are not legal regulations; however, they provide insight into how the attorney general will assess compliance with the act.
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The guidance provides information and tools for employers on conducting self-evaluations, assessing whether existing policies comply with MEPA, and comparing employee pay.
The Massachusetts Attorney General's Office issued on March 1, 2018, its much anticipated guidance on the new Massachusetts Equal Pay Act (MEPA). The expansive law takes effect on July 1, 2018, and mandates equal pay among employees of different genders performing comparable work. (See Holland & Knight alert, "Massachusetts Enacts Groundbreaking Pay Equity Law," Aug. 2, 2016.) Importantly, the attorney general's guidance provisions are not regulations and do not carry the force of law. The attorney general is charged with enforcing MEPA and authorized to bring suit on behalf of employees against employers that fail to comply by the law's requirements. Rather, they describe how the attorney general is presently interpreting the law for enforcement purposes. Many key questions and concerns remain unaddressed, but employers now have a better idea about how the attorney general will assess compliance with MEPA.
Exceptionally Broad Scope
MEPA applies to all employers in Massachusetts as well as employers based outside of Massachusetts who have employees with a primary place of work in Massachusetts. According to the guidance, even employees physically located or living in other states may qualify as employees under MEPA if they telecommute to a Massachusetts worksite. The law also applies to nearly all types of employees, including part-time, seasonal, and temporary employees.
Comparable Work
MEPA defines "comparable work" as work that requires substantially similar skill, effort, and responsibility and that is performed under similar working conditions. Employers are faced with the challenging task of applying those broad, undefined terms to various categories of employees. The guidance contains some commentary and illustrations to assist employers in this task. For example, with respect to skill, the guidance explains that janitorial and food service jobs may qualify as comparable work because those positions "generally do not require previous experience in the field or specialized training, and therefore may require comparable skills, even though the substance of the two jobs is different." Likewise, "the amount of physical exertion [or effort] that goes into performing the average janitorial and food service jobs may be substantially similar." With respect to "responsibility," employers should assess "the amount of supervision the employee receives or whether the employee supervises others, and the degree to which the employee is involved in decision-making such as determining policy or procedures, purchases, investments or other such activities."
"Working conditions" include "the physical surroundings and hazards encountered by employees performing the job." Different working conditions also may include shift differentials. Accordingly, it is important to distinguish specific circumstances, such as whether workers are working day or night shifts, indoors or outdoors, in offices or on the factory floor.
The emphasis is not on the job title or the subject of the work but on how the work is performed. Consequently, even employees performing significantly different jobs (e.g., food service versus janitorial) may be considered to be performing comparable work for purposes of equal pay if the jobs require substantially similar skill, effort, and responsibility and are performed under similar working conditions.
Permissible Factors for Variations in Pay
MEPA permits differences in pay for employees performing comparable work only when based on 1) a system that rewards seniority with the employer; 2) a merit system; 3) a system that measures earnings by quantity or quality of production, sales or revenue; 4) geographic location; 5) education, training or experience to the extent such factors are reasonably related to the job; or 6) travel, if travel is a regular and necessary condition of the job.
To qualify as a seniority, merit, or production system, there must be a "plan, policy, or practice that is predetermined and predefined; used by managers or others to make compensation decisions; and uniformly applied in good faith without regard to gender." Further, seniority systems must count time on protected leave, including family and medical leave, small necessities leave, domestic violence leave, and parental or pregnancy leave. Merit systems must be based on "legitimate, job-related criteria," which should be set forth in a performance rating plan or policy.
Confusingly, the guidance warns that employers may not rely on changes in labor markets, even though several of the permissible exceptions enumerated in the statute implicitly rely on changes in labor markets to justify variances in pay, including differences in geographic location and the relative values of production, education, training, and experience.
Wages
Wages are defined broadly to include "all forms of remuneration for work performed, including commissions, bonuses, profit sharing, paid personal time off, vacation and holiday pay, expense accounts, car and gas allowances, retirement plans, insurance, and other benefits, whether paid directly to the employee or to a third-party on the employee's behalf." Thus, to determine if similarly-situated employees are being paid the same for comparable work, employers must look beyond salaries and hourly pay and incorporate all forms of remuneration, including eligibility to participate in benefits and supplemental compensation programs.
Pay Secrecy and Salary History
Under MEPA, employers cannot ask an applicant or an applicant's former employer what the applicant was being paid, and employers cannot ask the applicant to volunteer such information. However, nothing prevents an applicant from truly volunteering the information, and employers are permitted to ask applicants for salary requirements or expectations.
Employers also may ask or confirm an applicant's salary history after the employer has already made an offer of employment with compensation. The only exception is that employees who have access to wage information because of their job responsibilities (e.g., HR employees, payroll employees, and supervisors) can be prohibited from disclosing wages of others that those employees learn through their job duties.
Enforcement and Liability
The guidance suggests that employers violating MEPA may be liable for the amount by which the employee was underpaid (as compared to employees of another gender performing comparable work), double damages, and attorneys' fees and costs. Aggrieved employees may bring a civil claim with the attorney general or in court. A three-year statute of limitations applies.
Self-Audits and Affirmative Defenses for Employers
Employers may have a "complete defense" to MEPA claims if they have conducted a legally sufficient self-audit of their pay practices within three years before the claim is filed. To qualify for this affirmative defense, the self-audit must be reasonable in detail and scope, and the employer must establish reasonable progress was made towards eliminating any impermissible gender-based wage variations discovered in the audit. Self-audits that are deficient but done in good faith will not provide a complete defense to MEPA claims but can prevent liability for double damages.
Whether a self-audit is "reasonable in detail and scope" will depend on the size and complexity of the employer, but factors include:
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whether the evaluation considers a reasonable number of jobs and employees;
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whether the evaluation takes into account all reasonably relevant and available information; and
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whether the evaluation is reasonably sophisticated in its analysis of potentially comparable jobs, employee compensation, and the application of the six permissible reasons for pay disparities.
Conducting a self-audit requires gathering a significant amount of employee data and analyzing jobs that may be considered comparable based on the skills, effort, and responsibility required, as well as the working conditions. For midsize and large employers, conducting a formal statistical analysis will likely be necessary.
Guidance on Conducting Self-Evaluations and Assessing MEPA Compliance
The guidance includes appendices, which provide 1) a basic guide for conducting self-evaluations, 2) a checklist to consult when assessing whether existing polices comply with MEPA and 3) a pay calculation tool, which provides a basic starting point for comparing employee pay.
