Switching It Up: Massachusetts Enacts Bold New Equal Pay Law

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Posted in: Civil Rights

The gender wage gap is persistent, entrenched, and bemoaned. What would it take for it to be narrowed instead? There is no easy answer to that question, but part of the answer lies in trying to remove some of the known obstacles to pay equity. Massachusetts has done just that, with a law that tackles the “prior salary” problem—the ostensible need of employers to match an applicant’s prior salary, which just compounds all previous pay inequities.

The Problem of Pay Inequality

Women earn less than men in the United States, even when doing the same job in the same conditions. This fact—captured by the phrase the “gender wage gap”—defines perhaps the most significant aspect of women’s working lives in this country. It also drives things like the number of families living in poverty (a significant proportion of which are in female-headed households with children).

On average, a woman earns less than 80 cents for every dollar a man earns. Equal Pay Day, celebrated in April, represents how long a woman has to work into a subsequent year to accumulate the pay her male counterparts had by New Year’s Eve. Almost no one denies the existence of the gap, nor the fact that some of it is the result of pay discrimination.

The gender wage gap is largest for African American and Latina women, and it exists at every level of earnings. Female surgeons earn less than male surgeons, as do female accountants, lawyers, teachers, and clerical workers. This pay gap grows over a woman’s lifecycle, with women’s earning only 38 percent of their male counterparts over 15 prime earnings years, according to one study. And one important, though underplayed aspect of the wage gap is that women suffer its effects throughout retirement because virtually every pension system is based on salary in some way. This was one of the facts that motivated Lilly Ledbetter to challenge pay discrimination she suffered while working in a tire manufacturing plant for Goodyear Tire & Rubber. Her pay discrimination, which she more than adequately proved to a jury before having her case thrown out on procedural grounds, was a gift that will keep on paying as she collects a smaller retirement benefit each and every month.

Using the Law to Narrow the Gap

One might have expected the gender wage gap to have disappeared as women increased their labor force commitment over the last several decades, but the numbers prove otherwise. (A chart compiled by the National Committee for Pay Equity documents the slow progress in eliminating the wage gap.)

The centerpiece of pay equity law is the federal Equal Pay Act (EPA), enacted in 1963, one year before Congress adopted the broader and more sweeping ban on employment discrimination—Title VII. The EPA guarantees equal pay for equal work for men and women who do the same job for the same employer (while Title VII prohibits employers from taking sex into account when making or implementing any pay decision, regardless of whether a comparable worker was treated better).

Both laws are important, albeit limited, but neither has bridged the pay gap, which has barely moved since the 1980s. Part of the problem is an affirmative defense in the Equal Pay Act (one also added to Title VII for pay claims) that protects decisions based on any “factor other than sex.” This has traditionally been read broadly by courts to permit employers to explain disparities by reference to prior salary, market conditions, negotiation by the employee, and a variety of other justifications that serve to perpetuate prior pay discrimination and, in some cases, exacerbate it.

Efforts to amend the EPA have languished in Congress. A leading proposed bill, the Paycheck Fairness Act, would tackle many current obstacles to pay equity. But it does not show any signs of passing. State legislatures, however, have begun to tackle pay equity problems more proactively.

In 2016, California passed the Fair Pay Act, which fills some of the gaps in federal pay equity law. The legislature made findings that the wage gap is wide, especially for women of color, and significantly affects women’s economic security, especially for single mothers. It further identified occupational segregation—the reality that there are “women’s jobs” and “men’s jobs”—as a significant driving force in the pay gap. A tool developed by economists, the Index of Occupational Dissimilarity, measures the degree of occupational segregation by the percentage of male or female workers who would have to change jobs in order for each occupation to have gender representation that reflected the workforce as a whole. A value of one indicates a completely segregated workforce; a value of zero indicates a completely integrated one. Although the score on this index has declined (indicating greater gender integration), the score was .50 in 2011, which means that fully half of women or men would have to change occupations to achieve completely integration. (A detailed and scholarly treatment of the occupational segregation problem, published by the Institute for Women’s Policy Research, is available here.) And the reality is that women’s jobs pay less.

The California legislature also zoomed in on pay secrecy as an enabling factor in the wage gap. Pay decisions are usually made in secret. And even though it is illegal under several state laws and under the federal National Labor Relations Act, a shocking number of employers explicitly prohibit employees from discussing their pay with co-workers. Yet pay information is essential for an employee to learn whether she has been paid fairly. Under the federal Equal Pay Act, her legal claim depends on her ability to identify an actual comparator—a man doing her job for the same employer in the same location for more money. If pay is kept secret, how would she ever know there was a disparity?

Moreover, pay discrimination is hard to discover because pay is an inherently favorable employment action. Being offered a job with a particular salary is a good thing, as is getting a raise or a bonus. But a good thing can become a bad thing if one learns at the same time that a new male hire was offered more to do the same work, or that male co-workers received significantly bigger raises without justification for the difference.

The California law expands on federal pay law by narrowing the affirmative defenses an employer can offer to explain a pay disparity, loosening the search for a comparator, increasing the damages available for a proven violation of the state’s equal pay law, and providing that an employer cannot prohibit employees from discussing or inquiring about wages.

New York passed some of the same protections as part of Governor Andrew Cuomo’s Women’s Equality Agenda, which included several measures to protect women against discrimination (the law and its history is discussed in more detail here and here). Like California, New York tackled some of the thorniest pay equity problems head on. In broad brush, it made it more difficult for employers to explain away pay disparities and tried to promote pay transparency.

The New Law in Massachusetts

Massachusetts not only followed in the footsteps of these two strong examples, but also took some new steps in the fight against pay inequity.

First, the Massachusetts law does not include a “factor other than sex” defense. Rather, it defines the specific factors that can be taken into account. And, for those, such as education, training, and experience, the employer bears the burden of showing that “such factors are reasonably related to the particular job in question and consistent with business necessity.” This is a feature of the California and New York laws, as well as the proposed but as-of-yet-unpassed, federal Paycheck Fairness Act. This is important because no two employees will bring identical resumes to the table. If an employer can defend against an equal pay claim by rummaging through the files and coming up with some ostensibly relevant difference, the law is providing very little protection. In the approach taken by these states, the employer cannot just point to any difference and claim it was dispositive; it must show that the particular difference was a relevant and necessary consideration for the particular job.

Second, the new law broadens the definition of equal work—replacing the term, first of all, with “comparable work,” which is defined as “work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions; provided, however, that a job title or job description alone shall not determine comparability.” This may not seem like a significant improvement over the Equal Pay Act’s search for a substantially similar job, but this is a looser term and definition, perhaps inviting claims of comparable worth, in which a “woman’s job” could be compared to a “man’s job” if they required equal skill and effort.

Third, Massachusetts has expanded the remedies available to pay discrimination victims. In addition to unpaid wages, a winning plaintiff is entitled to “liquidated damages” in the same amount—a penalty for the employer, and additional compensation for the employee. The employee is also entitled to attorney’s fees, which is important in enticing attorneys to represent employees in discrimination claims, which have a very low success rate.

Fourth, the law provides an incentive to employers to audit their own pay practices to look for (and presumably correct) pay disparities. Employers who conduct such self-evaluations can minimize their liability in equal pay lawsuits. This is important, as companies who voluntarily do such audits typically find significant disparities. If such audits were more commonplace, the wage gap might narrow from that alone.

Finally, and importantly, the new law does not allow an employer to ask an applicant about salary history (or seek the information directly from a prior employer) until after “any offer of employment with compensation has been made to the prospective employee.” In other words, Massachusetts deals with the prior-salary problem by eliminating it. But this provision also does something more subtle, with a potentially more significant impact. It shifts focus from the employee to the job—and forces the employer to think about how much the work is worth. This eliminates many of the factors that seem to perpetuate the wage gap, such as how well an applicant negotiates a starting salary or how the employer might assess an applicant’s worth based on stereotyped views of women.

Conclusion

The new law in Massachusetts is part and parcel of a welcome trend—states’ stepping up to protect employees in ways that Congress cannot seem to do. Massachusetts builds on the approach endorsed in California and New York and opens a new discussion about the irrelevance of prior salary and the relevance of employers’ taking some responsibility for their own pay structures. This is a strong step in the right direction.

Posted in: Civil Rights, Employment Law

Tags: Legal