Massachusetts Pay Equity
The Massachusetts Act to Establish Pay Equity takes effect on July 1, 2018. The goal of the new law is to reduce pay differentials among men and women doing comparable work. The penalties for violating the new law include back wages, benefits and other compensation, and attorney’s fees.
Before the law takes effect, we are encouraging our clients to conduct internal audits of their pay practices. The goal of these self-audits is two-fold. First, an audit will reveal any gender-based pay discrepancies that should be remedied before the new law takes effect. Second, the new law allows employers to use internal audits as an affirmative defense against future claims of gender-based wage discrimination. Audits should be conducted at least every 3 years to take advantage of the affirmative defense.
To conduct an internal audit, we recommend that our clients gather the following data on their pay practices:
- Job duties. Under the new law, men and women must be paid equally for “comparable work.” Comparable work is work that is substantially similar and requires similar skill, effort, responsibility, and working conditions.
- Seniority. Employers may pay people different wages based on seniority. However, parental and pregnancy-related leave cannot be held against an employee when determining seniority.
- Quantitative measures of performance, such as production or sales
- Geographic location
- Education, training, or experience
- Frequency of travel
- Hours worked
Once this data has been collected, employers should review the data carefully to determine whether men and women are being paid differently for comparable work. Employers are allowed to pay employees differently based on: (1) bona fide merit-based factors, including seniority, performance, and education or training, and (2) job-related factors such as geography and travel. However, if you discover a trend indicating that men and women are being paid differently regardless of these factors, you should take steps to remedy these disparities before the new law takes effect.
Potential steps for fixing a gender-based pay disparity include:
- Increasing pay
- Offering promotions where appropriate
- Reorganizing job responsibilities to ensure equal pay for equivalent work
- Examining hiring and promotional practices for gender bias
- Changing performance review procedures
However, under the new law, employers may not reduce pay in order to bring the company into compliance.
Pay Equity Laws in Other States
California, New York, and Maryland have recently adopted their own expansive pay equity laws. Although Massachusetts is the only state to offer an affirmative defense to employers who conduct a self-evaluation and take steps towards remediating gender-based pay differences, conducting an internal audit will help employers in other states determine whether they have pay equity problems that should be addressed in order to come into compliance with their state’s pay equity laws.
New Reporting Requirements for the 2017 EEO-1 Form
In addition to the Massachusetts Pay Equity Law, the U.S. Equal Employment Opportunity Commission (EEOC) has changed its reporting requirements to include pay equity data. For many years, companies with over 100 employees (or 50 or more employees for federal contractors) have been required to report data on job category, sex, and race/ethnicity via the EEO-1 form. Starting with the 2017 form (due March 31, 2018), employers now must report pay data by job category, sex, race/ethnicity, and hours worked.
For employers affected by the change in the EEO-1 form, an internal audit of pay practices can serve the dual purpose of complying with the Massachusetts Pay Equity Law and gathering the necessary information for the new EEO-1 report.
Employers should also be aware that there is a good chance that the Trump Administration will revoke the new EEO-1 requirements before March 2018. However, the administration has not yet taken steps to revoke these requirements, and they currently remain in effect for March 2018. For now, employers covered by the EEO-1 requirements should be prepared to comply with the new rule.
As always, feel free to contact us if you have any questions or need any assistance with conducting an internal audit.