Preparing for the new Massachusetts Pay Equity Law

The Massachusetts Act to Establish Pay Equity (“MEPA”) 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 (double the amount of the unpaid wages for up to three years), other compensation, and attorney’s fees. The new legislation also lengthens the statute of limitations for filing a claim to three years, and plaintiffs may choose to go directly to court to file suit or to file a claim with the Massachusetts Attorney General. 

MEPA is designed to motivate employers to conduct voluntary self-audits and take reasonable steps to remedy any pay inequities.  Specifically, employers that have completed a good-faith pay audit who can also demonstrate that “reasonable progress” has been made towards eliminating wage differentials, may take advantage of the following “Safe Harbor”:  

• A complete affirmative defense to claims under both MEPA and Massachusetts General Laws Chapter 151B, the state’s anti-discrimination statute; and
• Relief from liability for liquidated damages.

Importantly, MEPA is a strict liability statute, which means a plaintiff is not required to show discriminatory intent on the part of the employer. Therefore, we are encouraging all Massachusetts employers to conduct an audit and implement new pay practices as soon as possible to take advantage of the Safe Harbor defense to potential MEPA claims. To qualify for the Safe Harbor protection, audits must be conducted within the previous three years and prior to the commencement of a MEPA lawsuit. 

The below checklist reviews the steps employers must take now in preparation of MEPA. This article will be followed by a more detailed explanation of pay equity audits, including when and how to conduct an audit. 
 

What You Need to Do Now

• Conduct a Two-Phased Pay Equity Audit
  → Privileged Audit. In the first phase, employers should consider having outside counsel conduct an initial pay audit that is protected by the attorney-client privilege. MEPA specifically protects the content of the audit, or steps taken as a result of the audit’s findings from being used as evidence in a state pay inequity lawsuit as evidence that the employer was not in compliance before the audit, regardless of whether the audit is privileged or not. HOWEVER, this specific MEPA protection does not apply if an employee brings a claim under federal pay equity or discrimination laws. Under such circumstances, an audit that is not protected by the attorney-client privilege will be discoverable in the federal setting and may provide a plaintiff or the government with evidence of pay disparities that are not supported by legitimate factors. Therefore, it is important to initially conduct the audit on a privileged basis to protect against this possibility.
  → Non-Privileged Audit. If, after analyzing the results of a privileged audit and analyzing the risks to the company of conducting a public audit, the employer determines that it wants to take advantage of the Safe Harbor protection, it should consider a waiver of privilege with regard to some or all of the audit results or conduct a second, non-privileged audit that can be used for the Safe Harbor.

• Remedy Pay Inequities
  → If an employer determines that gender-based pay disparities exist, steps should be taken to remedy such disparities, such as: increasing pay; offering promotions where appropriate; reorganizing job responsibilities to ensure equal pay for equivalent work; analyzing hiring and promotional practices for gender bias; and changing policies and performance review procedures.
  → Employers should also develop a strategy for communicating pay corrections to the affected employees without increasing the risk of potential liability.

• Update Employment Applications
  → An employer may no longer ask an applicant about his or her salary history, including current rate of pay, prior to extending an offer to a job applicant. Therefore, employment applications should be amended accordingly.

• Implement Pay Policies
  → Implement standard pay ranges or guidelines for each position or classification. Positions should ideally be characterized by pay grade and applicable pay ranges for each pay grade.
  → Implement written policies for starting pay, pay increases, and bonuses. A written policy should outline the relevant factors decision-makers may consider in exercising discretion within the appropriate pay ranges.  Discretion should be based on objective rather than subjective factors.
  → Implement pay audit policy. Implement a policy and practice of conducting periodic pay analyses on at least an annual basis.
  → Update policy restrictions on discussing salary. Update any policies which include language that prohibits employees from discussing salary, which is not permissible under MEPA. 

• Document Pay Decisions
  → Create pay decision templates. Employers should require decision-makers to use standard pay decision templates to document the objective factors behind pay decisions at the time such decisions are made.  Documentation should capture all objective factors supporting the decision, such as the applicable pay grade and pay range for the position, and how relevant objective factors such as education, experience, and skills are tied to specific dollar amounts within the applicable pay range.
  → Review standard employee templates, such as offer letters and bonus plans, which communicate with employees about pay increases and opportunities, and their eligibility for the same. These documents should include clear language about eligibility requirements for pay increases and bonuses so employees are clear on the process and job performance factors upon which such decisions will be based.
  
  
• Review and Update Existing Processes
  → Assess the company’s performance evaluation process, documentation, and its role in pay decisions. Often performance evaluations are the only written evidence of an employee’s performance over the course of the year. Evaluations should focus on objective factors where possible, and should include guidelines for accurately rating employee performance, and performance examples.  Poorly conducted performance evaluation can lead to poorly explained pay decisions.
  → Train decision-makers on how to make proper pay decisions. Train decision makers on new company pay policies, applicable law, and how to properly make and document pay decisions.

Conclusion 

Under MEPA, there is sure to be an increase in pay discrimination litigation in Massachusetts, particularly with the potential for the recovery of double damages and attorneys’ fees. The new law goes into effect on July 1, 2018 so employers should act now to audit their pay practices and identify and correct any unjustified pay disparities. This will help employers ensure their pay decision processes are equitable, and will strengthen their ability to defend any potential claims of pay discrimination under the new law. 

If you are a Massachusetts employer and have not already taken steps to conduct your internal pay equity audit in preparation for MEPA, you should do so immediately. Please contact Jackie Piscitello ([email protected]) or Gina Wodarski ([email protected]) if you require assistance with developing a new pay equity policy, amending your current policies, or to otherwise perform an internal audit to ensure compliance with the new Pay Equity Law.