Massachusetts Pay Equity Law Bans Salary History Inquiry, and So Much More

The Act to Establish Pay Equity, amending G.L. c.149, §105A (MA Pay Equity Law), goes into effect July 1, 2018. All employers, regardless of number of employees, whose employees perform all or the greater part of their work in Massachusetts, are required to comply with the MA Pay Equity Law.

One of the law’s notable aspects is that a potential employer cannot ask a job candidate what his/her prior salary history is. Many employers regularly ask job candidates what they make as a way of gauging whether they can meet the compensation expectations of a job candidate or, in some cases, trying to determine the least amount of pay to offer. In this day of networking, management-level employees may also receive job inquiries from potential candidates, and it is not uncommon for managers to ask, “How much are you making now?” as a threshold question, to determine whether the inquiry is worth passing on. Unfortunately, if such benign questions are asked, the candidate may bring a legal claim for violating the MA Pay Equity Law.

With such a low threshold to assert a legal claim, what should you do? First, make sure all employees know that, under no circumstances, are they to ask what a job candidate’s prior salary history is, and make sure that there are no inquiries about salary history in any job applications. Also, educate employees on what they can ask, such as, “What is your salary requirement if you were to work here?” Such inquiries may not, however, be followed by inquiries that may cause job candidates to disclose their salary history, such as, “What is the basis for your requirement?” Second, set salary expectations for every open job at a rate that the company is willing to pay, if it finds a candidate with the requisite skills and experience. Then, what the candidate made before will make no difference, because the company will have already determined what someone with the requisite skills and experience is worth.  In Appendix B to the Massachusetts Attorney General’s Overview and Frequently Asked Questions, there is a sample checklist to review company policies and practices.

The MA Pay Equity Law also prohibits discrimination based on gender for comparable work, in payment or pay rates of wages, including base pay, bonuses, incentive compensation, and benefits. Unlike prior pay equity laws, the MA Pay Equity Law defines “comparable work” broadly, looking at factors such as skill, effort, responsibility, and working conditions, and redefines what those terms mean. For example, when assessing skill, employers are not permitted to consider requirements such as having a college degree, if those requirements are not necessary for performing the job. Also, the new law provides clarity on “effort,” defined as the amount of physical or mental exertion needed for the job; on “responsibility,” defined as the degree of accountability required, including the extent to which an employee works without supervision or exercises supervisory functions, and the impact of employee’s exercise of job functions on the employer’s business; and on “working conditions,” including work surroundings and hazards, and shift differentials. Variations in pay may be allowed due to a bona fide seniority system; merit system; objective quantity or quality; geographic location; education, training, or experience tied to job performance; or regular and necessary travel. The definitions are critical and seek to provide a better understanding than prior laws of what is “comparable work.”

Another key point in the new law is that employees must be allowed to disclose information about their own or other employees’ compensation; high-level managers can be required not to disclose compensation information about other employees, but cannot be prohibited from disclosing their own compensation information.

Finally, like most discrimination laws, the MA Pay Equity Law prohibits retaliation against an employee or candidate for: (a) opposing any prohibited act or practice; (b) making a complaint or causing a complaint of a violation of the MA Pay Equity Law to be made; (c) participating in an investigation of a complaint of a violation of the MA Pay Equity Law; or (d) disclosing the employee’s wages or inquiring about or discussing the wages of any other employee.

Unique to pay equity laws throughout the United States, the MA Pay Equity Law provides a “safe harbor” for employers who conduct a good faith self-evaluation of pay practices and demonstrate reasonable progress toward eliminating gender-based wage differentials. If the self-evaluation is completed and reasonable progress on remedying any gender-based wage differentials is being made before legal action is commenced, an employer may use the self-evaluation process as an affirmative defense to the legal action.

Because a violation of the MA Pay Equity Law can result in liquidated damages (double damages), a self-evaluation may be worth the time, since even an unreasonable investigation that results in reasonable progress on remedying gender-based wage differentials may serve as a bar to liquidated damages. Appendix A to the Massachusetts Attorney General’s Overview and Frequently Asked Questions provides a helpful guide on how to get started on a self-evaluation. However, in-house counsel should be involved in any self-evaluation process, so that the process may be protected to the maximum extent permitted by law by attorney-client privilege or attorney work product doctrine, because there is no similar safe harbor under federal pay equity laws and for some other state pay equity laws.