What does Massachusetts’ equal pay law mean for employers?

Will Massachusetts be the first state to close the gender pay gap? On August 1, the state passed the most robust equal pay law the United States has ever seen. Massachusetts’ expanded Equal Pay Act targets salary history, pay secrecy and a comprehensive definition of ‘comparable work’ as a way to break the cycle of pay disparity between men and women.

In the United States, women earn 79 cents for every dollar earned by men. And in Massachusetts, women make 11K less than men every year, on average. Women are paid less than men in their first jobs, even when they’re in the same field and have the same educational background. Women are also penalized more than men for initiating salary negotiations and for having caregiving responsibilities outside the workplace.

“These are things that don’t just affect one job; it keeps women’s wages down over their entire lifetime,” explains bill co-sponsor and State Senator Pat Jehlen. Victoria Budson, supporter of the law and Executive Director of the Women and Public Policy Program at Harvard University’s Kennedy School of Government, puts it this way:

“What happens to people over time is if in that first negotiation or those first few jobs out of high school or college you are underpaid, then you really get a snowball effect where if each subsequent salary is really benchmarked to that, then what can happen is that type of usually implicit and occasionally explicit discrimination really then follows that person throughout their career.”

A rising tide lifts all boats. When the law goes into effect in 2018, it will pave the way for employers to correct the wage gap and provide equal pay for equal work. This will benefit all historically underpaid workers, including minority workers.

What’s good for candidates may also be good for employers. According to SHRM’s 2016 Job Satisfaction and Engagement Report, compensation is still a top contributor to employee engagement, and even more important than it was in 2015. Workers may be tempted to look elsewhere for the raises they missed out on during the recession. Paying workers a competitive wage means they won’t have to. In addition, excluding salary history from the interview process can create a more positive experience for candidates. LevelUp’s Director of Talent, Anik Conley-Das, says:

“The impact of not asking for previous salaries is ultimately a positive one, for both candidates and employers. Candidates can now focus on their value proposition for the role they are pursuing, and can now have more holistic conversations with employers without being discounted by the singular factor of pay, which often times is not even a good indicator of fit or success.”

Here are all the main ways that the Massachusetts Equal Pay Act promotes equal pay, and how both local and multi-state companies can stay compliant with these changes.

A broader definition of ‘comparable work’

Today, job titles and job descriptions are enough to legally define ‘comparable work,’ or ‘equal pay for equal work.’ Under this narrow definition, janitors (a job dominated by men) are paid 22 percent more than housekeepers (a job dominated by women). After the law comes into effect in 2018, these two jobs will be considered ‘comparable,’ because they share similar working conditions, job responsibilities and comparable skills. Comparable jobs will have comparable wages. A joint press release from the Massachusetts House and Senate details some exceptions to the rule.

How might ‘comparable work’ factor into recruitment? Jobseekers in search of higher pay may reference a wider range of comparable jobs in interviews. An Assistant VP of Human Resources, for example, might compare their role to that of a ‘VP of Talent,’ ‘VP of People,’ ‘Director of Employee Engagement,’ ‘Chief People Officer’ or ‘Global Head of Employee Experience.’

Illegal to ask for salary history

“What was your last salary?” Jobseekers who dread this question will be pleased to know that employers will no longer be able to ask it, at least not in Massachusetts. Massachusetts will be the first state to ban employers from asking for candidates’ salary history until after they have extended a job offer with a detailed compensation package. This prompts some questions. Would employers really ask for compensation after a candidate is hired? Would they require candidates to sign a pre-employment waiver? It’s an odd thing to write into a law, but if it helps candidates get paid what they’re worth, then we support it. Candidates can still volunteer to disclose their past salary in the hiring process, but this will never be required.

To be compliant, Massachusetts employers must remove this question from job application forms and interview processes. In addition, employers must ensure that anyone participating in recruitment is aware of this law. As for multi-state employers, their job applications must be updated to say that candidates in Massachusetts should not answer salary history questions.

No pay secrecy

About half of employees report that their employers discourage or prohibit them from sharing notes about how much they’re paid. Some employers even go so far as to mandate pay secrecy in employee handbooks. This is illegal and has been so for 80 years. Under the National Labor Relations Act enacted in 1935, employees have a legal right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” That includes talking about our salaries. Most of us don’t even know this law exists.

Because of pay secrecy, women and minority workers are often unable to find out if they’re being unfairly paid. Similar to President Obama’s executive order in 2014, Massachusetts is giving this issue a much-needed signal boost by banning pay secrecy.

Penalties and protections

Noncompliance penalties are steep. The Equal Pay Act grants both employees and the Massachusetts Attorney General with the right to sue. Furthermore, employees can file claims on behalf of “similarly situated employees,” which could result in expensive class action lawsuits.

The Act does provide employers with protections. Employers may defend themselves against claims of gender-based pay discrimination by completing a self-evaluation of their pay practices. However, this ‘affirmative defense’ (a fact or set of facts that mitigates legal consequences) will not extend to violations of the Act’s salary history and pay secrecy provisions.

What employers can do right now

We caught up with Joel G. Kinney and Daniel Paradis from Fort Point Legal, PC in Boston to ask them how employers should prepare for 2018. Here are their recommendations. At the very least, employers should develop job matrices that document current and future roles. These should include the relative skill, effort, responsibility, working conditions and educational requirements or continuing education needed for each. They should then plug employees into the matrix to identify pay gaps.

Employers would also be well-advised to begin a written self-evaluation that they can use to predict their compliance once the law becomes effective. This evaluation can serve as an early benchmark to help employers scope out the work they need to do to be compliant with the Act.

Finally, but most critically: Employers should make sure they’re on the right track by seeking the advice of qualified legal counsel.