Last month, Massachusetts Governor Charlie Baker signed into law the “Act to Establish Pay Equity”, which will go into effect starting July 1 of next year. The Act is considered ground-breaking in the U.S. for its additions to the state existing equal pay legal framework.
The Act has three main provisions that add to or change existing equal pay law. The first provision, which is creating all the news, creates a new prohibition against employers from asking prospective employees for their salary history. The purpose of this provision is to end ongoing pay disparity when employees who are paid less than their counterparts move jobs. Preventing prospective employers from asking for salary history should hopefully prevent pay disparity from continuing into a new job.
This provision does not prevent a prospective employee from volunteering their salary history (although employers should not try and skirt around the law by soliciting a prospective employee to volunteer that information – it should be solely of the applicant’s own volition). Nor does it prevent an employer from verifying that volunteered salary history with the prospective employee’s former employers. However, the Act does not speak as to whether an employer may ask prospective employees for their salary expectations (i.e., what they expect to be paid in the position they are applying for). We will likely have to wait for further guidance from the OAG on this point.
A subsection of the first provision also prohibits employers from having “pay secrecy” policies. As a result, employers cannot discipline employees for asking their co-workers about the pay and benefits they receive. Of course, an employer is not required to inform an employee of the pay and benefits his or her co-workers receive.
The Act creates a private right of action in employees for violations of the prohibition on salary history questions and pay secrecy policies. Unfortunately, the damages that could be recovered for violation of the salary history prohibition are unclear at this point.
The second provision of the Act amends Massachusetts’ existing equal pay laws to clarify what kind of pay discrepancies between “comparable work” are justifiable. The Act explicitly allows for pay discrepancies based on:
- – Seniority, although employers may not deduct time taken off pursuant to FMLA leave or maternity and paternity leave from an employee’s seniority
- – Geography
- – Education or training
- – Job performance based on sales, revenue, or other quantifiable metrics
- – “Merit” based systems
“Merit” based systems will likely prove to be an avenue of litigation for aggrieved employees, as poorly-designed systems leave open the possibility for gender-based disparities.
The second provision also amends the statute of limitations for equal pay claims from one year to three years, with a new three-year statute of limitations applicable to each paycheck that violates the equal pay laws. The Act also clarifies that pay discrimination claims are not subject to the administrative filing requirement with the Massachusetts Commission Against Discrimination.
Finally, the Act reaffirms that employers have an obligation to eliminate gender-based pay discrimination. However, it also now provides an affirmative defense against equal pay litigation if the employer can show that it, within the past three years prior to the commencement of litigation, has completed a good faith self-evaluation of its pay practices and has made “reasonable progress” in eliminating gender-based pay discrepancies. An employer is not entitled to the defense if it cannot show that its self-evaluation was reasonable in scope or that it has made reasonable progress in eliminating any gender wage gap. Unfortunately, the vagueness of this affirmative defense will probably lead to litigation in every wage discrimination case over whether an employer’s efforts were “reasonable”. It should also be noted that the affirmative defense is only available against claims of wage discrimination, and not against claims of violations of the prohibitions against salary history questions or pay secrecy policies.
Startups are uniquely positioned to implement these new changes, since they are on the “ground floor” hiring their first employees. However, founders should be careful not to carry over things from the way they were done at their old “real job”, like asking applicants for salary history or discouraging employees from sharing details of their compensation packages with one another. In any event, when hiring its first employees, a startup should consult with an attorney to establish best practices for hiring, setting compensation, and other aspects of human resources.