Common Cents: Pay Equity Laws Gain Momentum

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If there’s one issue that keeps making the news, it’s the pay gap between men and women.  From the U.S. Women’s Soccer team’s public fight for wage equality, to large corporations like Apple and Amazon releasing their pay data, to the presidential debates, it seems that everyone’s talking about equal pay.  And this issue has also captured the attention of lawmakers. 

According to the oft-cited statistic on the gender pay gap, a woman in the U.S. earns approximately 79 cents for every dollar earned by a man.  Although legislation has been introduced in Congress to bolster the Equal Pay Act, the prospects for enactment remain slim.  

In contrast to the lack of action at the federal level, the issue of pay equity has been gaining momentum at the state level. California, Maryland and New York have each enacted sweeping changes to their equal pay laws within the past year, and Massachusetts just joined them with a pay equity law that was signed Aug. 1 and becomes effective July 1, 2018.

In a recent presentation to the National Employment Law Institute’s 40th Annual Employment Law Update in Washington, D.C., Jill Rosenberg, a partner in Orrick, Herrington & Sutcliffe LLP’s New York office, highlighted pay equity legislation as a hot topic. Only a handful of states have passed such laws so far, but “more are coming,” she said, and the Massachusetts law “may be the broadest” one yet.

Salary History Queries Banned

One of the most impactful provisions in Massachusetts’ new law is its prohibition against requesting, or requiring as a condition of being interviewed, that a prospective employee disclose his or her prior wages or salary history.  The law will also bar employers from contacting any current or former employer of a prospective employee in an attempt to acquire salary history information without the employee’s written authorization. 

Massachusetts is the first state to impose such a prohibition.  Proponents of the legislation have indicated that its underlying purpose is to end the perpetuation of lower wages for female employees, who may continue to earn less than men so long as their subsequent employers can offer them salaries equivalent to their current, potentially sex-disparate incomes.

Rosenberg flagged the salary history restriction as an “issue to watch,” and she said more states may be moving in that direction.  A recently introduced bill seeking to amend the California Fair Pay Act included language similar to that of the Massachusetts law, but that language was subsequently removed. Under the modified proposal, California employers would still be permitted to consider salary history information when making a job offer, but prior salary alone would be insufficient to justify a pay discrepancy between two substantially similar jobs.

Employee Protections Expand

Aside from the groundbreaking salary history restriction, the Massachusetts law includes other noteworthy provisions.  Like California and Maryland before it, Massachusetts will require that employers provide equal pay for individuals engaged in “substantially similar work,” which is a more expansive standard than the “equal work” requirement under the federal Equal Pay Act.  According to Rosenberg, legislatures have made the change to help broaden the comparison between jobs and to prevent employers from arguing that certain jobs aren’t equal in every way.

States are also narrowing the defenses that employers can raise when attempting to account for differences in pay.  The laws in California, Maryland, Massachusetts and New York all require employers to point to “bona fide” factors other than sex—such as education, training or experience—which is tougher than the EPA standard that allows employers to justify pay disparities between the sexes on the basis of any factor other than gender.

Pay transparency requirements are on the rise as well, Rosenberg added.  Numerous states—most recently, Maryland, Delaware and Massachusetts—have enacted laws prohibiting employers from taking adverse action against employees who disclose or discuss their wages.  Such laws can help female employees ascertain whether their incomes are in line with their male counterparts.

Rosenberg said employers should consider conducting their own internal pay audits, and they should document and justify any differences in pay, or correct pay disparities that can’t be justified.  With all the attention the gender wage gap and pay equity laws are receiving, it’s better to get out in front of the issue than to let yourself become the target of negative publicity or a lawsuit.   

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