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March 16, 2018

Massachusetts Equal Pay Act: 5 Things Every Employer Should Do Before It Takes Effect On July 1, 2018

In 2016, Massachusetts enacted an Act to Establish Pay Equity which updated and replaced Chapter 149 Section 105A and is also known as the Massachusetts Equal Pay Act (“MEPA”). Employers must be in full compliance with MEPA by July 1, 2018. Recently, the Attorney General’s Office, which is charged with enforcing MEPA, released guidance for employers. Below are five action items all employers should consider undertaking prior to MEPA’s July 1 effective date.

1. Conduct a self-evaluation of your pay practices to qualify for MEPA’s affirmative defense.

MEPA provides a complete defense against any liability under the statute for employers that have conducted a qualified, self-evaluation of their pay practices within the past three years. By qualifying for this affirmative defense, employers can avoid the significant monetary penalties imposed by MEPA for violations, including double damages and, perhaps more importantly, liability for retroactive payments to affected employees uncovered during the evaluation.

To qualify for the affirmative defense, an employer’s self-evaluation must be reasonable in detail and scope, and must likewise reflect reasonable progress toward eliminating any uncovered pay disparities by changing affected employees’ salaries so that employees performing comparable work are paid equally. If an employer’s self-evaluation is insufficient but made in good faith, the employer will not be liable for double damages under MEPA but will still be liable for damages in an amount of what should have been paid to the employees.

Employers wishing to conduct a self-evaluation should retain qualified legal counsel to do so. This will help ensure that the evaluation is sufficiently reasonable to qualify for the affirmative defense, and that appropriate portions of it are subject to the attorney-client privilege.

2. Update your employee handbook and retrain staff to comply with the new human resources requirements in MEPA.

MEPA create several new requirements concerning how employers interact with new and existing employees. These include, primarily, prohibiting employers from: (1) restricting employees from discussing wages; and, (2) seeking salary/wage history concerning prospective employees. The AG’s guidance clarifies these prohibitions by, among other things, outlining the scope of each, and providing limited exceptions. Most employers will have to retrain their HR staff and hiring managers to comply with the parameters of these new requirements to avoid inadvertent MEPA violations. Additionally, written employer policies and handbooks will need to be revised to account for these new rules.

3. Reevaluate your compensation and payroll systems to ensure they comply with MEPA’s “Permissible Variations in Pay.”

MEPA seeks to equalize pay for comparable work, but it does not outlaw every single variation in pay. MEPA explicitly permits six (and only six) compensation variations for the performance of comparable. The exemptions apply when the variation is based on at least one of the following factors:

  1. A system rewarding seniority;
  2. A merit system;
  3. A system measuring quantity or quality of production, sales, or revenue;
  4. The geographic location of a job;
  5. Education, training, or experience; or
  6. Regular and permissible travel requirements of the job.

To qualify for any of these exemptions, the compensation variation must be completely explained by one or a combination of the six exemptions outlined above. If an employer intends to defend a compensation variation based on an exemption, the employer should be sure to have written and updated policies that reflect bonafide and uniform application of the exemption. For example, if an employer intends to increase an employee’s compensation based on seniority, the employer should have in place a written policy detailing the scope and parameters of its seniority-based compensation system.

4. Update job descriptions and titles to confirm which employees are performing comparable work.

MEPA requires that employees doing “comparable work” be paid equally. To determine whether a job is comparable under MEPA, an employer must evaluate the skill, effort, and responsibility required to perform the job. According to the AG’s guidance, job descriptions and titles, while not dispositive of the question of whether work is “comparable,” may be “helpful” in making that determination. Accurate and updated job descriptions and titles, therefore, can serve as powerful evidence for an employer bearing on the question of whether individuals are performing “comparable work.” Employers should undertake a detailed review of all job descriptions and titles to ensure they are correct and include a description of the skill, effort and responsibility required to perform the job. Employers should also consider instituting a policy requiring periodic reviews and revisions of job descriptions and titles to ensure they remain accurate and complete.

5. Revise employee compensation structures beyond simple wages paid.

MEPA, like many Massachusetts wage and hour rules, defines wages broadly. Wages under MEPA includes all forms of remuneration including wages, commissions, bonuses, profit-sharing, paid personal time off, vacation and holiday pay, expense accounts, care and gas allowances, retirement plans, insurance, and other benefits. However, if an employee declines an employer’s offered benefit, for example insurance, an employer is not required to pay that employee more in wages to satisfy the statute. An employer’s MEPA responsibility for benefits, merely requires that all employees performing comparable work have equal access and opportunity to participate in the same benefits.

Nonetheless, the more types of wages and benefits an employer pays, the more opportunity there is for wage disparity, and the more complicated the determination of equal pay becomes. Employers should evaluate all the wage structures they currently offer employees, including and especially seemingly minor fringe benefits that may not be automatically considered as “wages” (e.g., gas cards, company car, subsidized meals), and revise any policies concerning those wages that may impact their compliance with MEPA.

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