Mass. Nonprofits Should Prepare Now for the New Pay Equity Law
By Angela A. Snyder
Angela A. Snyder
On July 1 a new pay equity law takes effect in Massachusetts, which creates challengesand opportunitiesfor compliance-minded nonprofits to face this critical issue head-on rather than wait to defend a claim.
Pay equity claims can be an expensive distraction that diverts resources away from your ability to fulfill your mission, but it doesnt have to be that way. By understanding the law, and your obligations, you can protect your organization, and avoid lawsuits that can reach tens of thousands of dollars or more.
Understand the Law.
The Massachusetts Pay Equity Act makes many changes to existing law, including definitions of how to determine comparable work and prohibiting organizations from requesting salary history before hire, to name a few. Additionally, employees will not be required to file a claim with the Massachusetts Commission Against Discrimination (MCAD) prior to filing a lawsuit, making this an expensive proposition for unprepared employers.
The silver lining in these new obligations is that the law provides an affirmative defense to employers who perform a good-faith evaluation of pay practices and create a plan for addressing identified disparities. Here are steps you can take.
Perform a Pay Equity Evaluation.
A pay equity assessment or audit is arguably the most efficient way to address the risk of a pay equity claim. The focus and depth of the analysis can vary depending on the size and needs of your organization, but there are three important goals:
Exercise Attorney-Client Privilege.
- Determine whether pay disparities exist that cannot be explained by other factors (remember, these are not factors that could explain the disparity, but factors that actually influenced the pay decision).
- Identify weaknesses or gaps in compensation policies and practices that contribute to such disparities.
- Create a plan for addressing the disparities.
Any time you internally audit or review your internal policies and procedures that review may be subject to disclosure, either during a government agency investigation or during discovery in litigation. By using an attorney, that same audit or review becomes protected by the attorney client privilege. When talking about an audit that may reveal evidence of pay inequity, using an attorney becomes a key risk management tool. You wont know beforehand what the audit will reveal, so the conservative approach is to take appropriate steps to protect the audit and its results to the greatest extent possible.
Make Appropriate Comparisons.
At its core, a pay equity assessment analyzes your organizations pay data to determine whether there are disparities. A typical analysis compares the average pay of men to the average pay of women (or other protected groups) within relevant job classifications to determine whether disparities exist. Under the federal Equal Pay Act, for example, this means comparing employees who perform jobs that require equal skill, effort and responsibility and are performed within the same establishment under similar working conditions.
Under the new Massachusetts law, this comparison is extended to include comparable work, defined as work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions. In other words, employers need to use more than job titles to make an appropriate comparison.
Disparities Require a Deeper Dive.
If your pay equity analysis reveals pay disparities within certain jobs, it will be necessary to more closely examine the affected groups to identify whether other relevant factors explain the pay differences. These factors can be objective or subjective and are usually unique to the particular job or industry. For instance, compensation for some jobs is based on the quantity or quality of achievements, such as sales revenues, patents filed, degrees achieved or publications made. Differences may also be attributed to market data or difficulties in filling the position that required paying a higher salary.
Review Compensation Practices.
Often, pay disparities are not the result of intentional discrimination, but instead due to a variety of factors ranging from salary history to lack of clarity in the organizations pay policies and practices. Even after the pay analysis is complete, it is important to consider whether modifications must be made to existing compensation policies, procedures and practices in order to help prevent unexplained disparities from continuing to occur. Failure to take this step could create an ongoing risk of future pay disparities. The following questions will help identify whether policies and practices should be examined:
Update Job Descriptions and Performance Evaluations.
- Are there written guidelines that define the factors to be considered when making pay decisions?
- Are decision makers held accountable for complying with compensation related policies and guidelines?
- Do different departments or teams within the organization operate independently and without oversight when making compensation related decisions, rather than a cohesive approach within the organization?
- Do the organizations pay practices require evidence to support the factors that are used to make pay decisions, such as written performance evaluations or objective market data?
- Is there documentation recording the reasons for pay decisions, particularly where those decisions deviate from expectations?
Job descriptions alone are not sufficient to show that jobs are equal. However, they can provide the foundation for demonstrating that certain jobs are either comparable or should be differentiated for purposes of salary comparison. Conversely, poorly drafted job descriptions can adversely impact an organizations ability to defend themselves when confronted with pay equity claims.
Additionally, because performance reviews generally impact salary directly, a flaw in the performance evaluation process may affect the legitimacy of pay decisions (and other employment decisions) that are tied to those results. For this reason, it is important that managers and any personnel responsible for setting salary levels are trained and understand the importance of accurately documenting performance issues and achievements.
Create a Plan.
The final step in any pay equity assessment is to make a plan for addressing pay disparities that are identified. Employers cannot lower the pay for some employees in order to equalize pay, so the righting of identified inequities can take time.
With the renewed focus on pay equitywhether across gender, race or other protected linesnonprofit employers can expect increased scrutiny of their pay decisions. Conducting an effective pay analysis will help ensure legal compliance and provide useful insight into the effectiveness of existing compensation practices. In Massachusetts, it will also provide an affirmative defense in the event of a pay equity complaint. And finally, to protect the process and your findings, strongly consider the use of an outside attorney. This will give you the benefit of the affirmative defense coupled with the protection of the attorney-client privilege.
Angela Snyder is an employment attorney with the law firm of Foley & Foley, PC, and partners with nonprofits, business owners, executives, and HR professionals to meet employment law related compliance needs. She can be reached at firstname.lastname@example.org or (508) 548-4888.