A new Massachusetts law, House Bill S.2119 "An Act to establish pay equity" is getting a lot of attention for expressly forbidding employers from inquiring about a prospective hire's past compensation. If you have a branch or a location in Massachusetts, or even if you don't but you engage employees remotely in Massachusetts, this law applies to you.
It is pretty obvious why you would want this information about a new hire. Past salary information helps you to gauge how much a new hire will cost you, or at least gives you some basic assumptions about where to anchor your opening offer; it outsources the task of deciding on a hiring salary offer to the prospective hire's past employers and so saves your HR manager time and provides greater budgetary certainty for a new hire.
While nothing in the law expressly forbids you from using generic data to infer a new hire's past salary - for example, data from a third-party provider about average salaries for a certain job title with a certain amount of education and experience - your inquiry can no longer be individualized to a specific prospective hire, at least without the written authorization of the employee after an offer (with stated compensation) has been made.
The Commonwealth's rationale is pay equity. Their thinking is that they do not want unequal pay or discriminatory pay that may be saddling the salary of a female or minority applicant stalking them throughout their career. There is a lot of merit to this argument. The best studies available have shown that, unless a job posting expressly states that a salary is negotiable, women are much less likely than men to negotiate their opening salaries. If a non-negotiated salary is your benchmark for your first job, even if you negotiate subsequent salaries in your second and third and tenth jobs, employers will be anchoring their opening offer to the latest in a chain of salaries that starts with an unequally lower offer. (But, interestingly, if a job posting does clearly state that a salary is negotiable, women may actually be more likely than men to negotiate their salaries.)
The press coverage of this new law focuses on its most revolutionary aspect, which is forbidding an inquiry into past salaries. But it actually does several other things that you should be aware of if you work in Massachusetts, own a business or a branch there, or if you hire remotely in Massachusetts. So lets look at the law itself.
A big one in my mind is that 105(c)(1) of the new law expressly codifies a rule that employers cannot forbid employees from discussing their pay, inclusive of all forms of compensation such as fringe benefits, or require them not to have such discussions as a condition of employment. At first blush I thought this statement was merely duplicative of existing NLRB rules and the general sentiment of employment law in the 1st Circuit holding the same, but the text itself has a potentially staggering other implication that the legislature may not have intended. Here is that section verbatim:
c) It shall be an unlawful practice for an employer to:
(1) require, as a condition of employment, that an employee refrain from inquiring about, discussing or disclosing information about either the employee’s own wages, including benefits or other compensation, or about any other employee’s wages;
Now, hang on. Isn't the idea that employees at least have the right to discuss their wages amongst themselves to essentially screen a single employer (their own) for discriminatory compensation practices? But this section is not so limited - at all! In fact, it provides no limitation whatsoever on exactly with whom the employee may discuss their own wages or even their co-worker's wages. In theory, this language is so broad that if you have an NDA forbidding an employee from disclosing salary information even to outside, non-governmental actors (like, say, your competitors!), that provision of your NDA may be presumptively unenforceable - or worse, your entire NDA may be invalid.
Fortunately, at least, the law expressly forbids human resources professionals from email-blasting salary information out into the world. But what if an employee outside of HR gets hold of this information, even unscrupulously? Nothing in the law prevents that employee from telling the world everything he or she knows about not just his or her own compensation, but the compensation of everybody at the company.
The potential jeopardy here is huge. What if a coworker has been compensated with stock options, and you are in the middle of a delicate mergers and acquisitions negotiation that requires an information asymmetry about how the company has valued its own stock in the past? What if a key vendor is funding a SPIF for your sales force and all of a sudden the whole world, including competitors who work with the same vendors who might not have as nice a deal, becomes privy to this information?
Obviously, employers cannot protect themselves by trying to keep salary data a secret from employees - your employees in Massachusetts now have a total right to seek this information from each other. No form of compensation is excepted from the law. Perhaps the legislature only intended that this information be an "open secret" among employees, not to be shared with the outside world - but that isn't how it wrote the law. So what can you do?
First and foremost, you will need to engage competent personnel to make sure that your organization, especially supervisors, HR personnel, and anyone with hiring authority is educated in the implications of this law. Maybe you need to revamp your online ordering portal. Maybe you need to refurbish your standard questionnaire. Those old craigslist ads you keep reposting once a week? Double- and triple-check those, and make sure that whoever is sorting through responses to them is fully aware of the implications of this law. There is no safe harbor for innocent mistakes made by employees who screen resumes even if those employees have no hiring authority.
Secondly, review your HR security practices. Maybe it's time to upgrade that old file drawer to a password-protected digital system. If you have outsourced your HR or payroll functions to a third party (as most employers do), get on the phone with them to make sure that they are aware of this new law and ask them what steps they are taking to protect secure information. If you use outside recruiters ,you need to call them too and make sure they are aware that, come January 1 2018 (the effective date of S.2119), they've got to be ready to comply with this new law.
A final word: there is a strong immunization against liability in gender discrimination cases in Massachusetts that you can give yourself now - and which you should have given yourself already! To wit:
(d) An employer against whom an action is brought alleging a violation of subsection (b) and who, within the previous 3 years and prior to the commencement of the action, has both completed a self-evaluation of its pay practices in good faith and can demonstrate that reasonable progress has been made towards eliminating compensation differentials based on gender for comparable work in accordance with that evaluation, shall have an affirmative defense to liability under subsection (b) and to any pay discrimination claim under section 4 of chapter 151B. For purposes of this subsection, an employer’s self-evaluation may be of the employer’s own design, so long as it is reasonable in detail and scope in light of the size of the employer or may be consistent with standard templates or forms issued by the attorney general.
You heard that right: any liability under MGL 151(B)(4), which is Massachusetts' general proscription against discriminatory employment practices, may be mitigated as an affirmative defense (meaning that it is raised at the point of lawsuit or EEOC filing) by a bona fide self-evaluation of pay equity at your company or branch with appropriate remedial measures.
In my opinion, everyone who can afford it should be engaging in such self-evaluation anyway, both to head off potential discrimination liability and because equal pay for equal work is simply the right thing to do. Whether or not you operate in Massachusetts, don't hesitate to contact us right away if you are looking for help designing such a plan. As an employment law attorney barred in Massachusetts, I know that compliance in the Commonwealth can be a pain - and so are the mandatory treble damages you face for most kinds of non-compliance. The price tag isn't worth it, and neither is a reputation as 'that employer who discriminates."
It is pretty obvious why you would want this information about a new hire. Past salary information helps you to gauge how much a new hire will cost you, or at least gives you some basic assumptions about where to anchor your opening offer; it outsources the task of deciding on a hiring salary offer to the prospective hire's past employers and so saves your HR manager time and provides greater budgetary certainty for a new hire.
While nothing in the law expressly forbids you from using generic data to infer a new hire's past salary - for example, data from a third-party provider about average salaries for a certain job title with a certain amount of education and experience - your inquiry can no longer be individualized to a specific prospective hire, at least without the written authorization of the employee after an offer (with stated compensation) has been made.
The Commonwealth's rationale is pay equity. Their thinking is that they do not want unequal pay or discriminatory pay that may be saddling the salary of a female or minority applicant stalking them throughout their career. There is a lot of merit to this argument. The best studies available have shown that, unless a job posting expressly states that a salary is negotiable, women are much less likely than men to negotiate their opening salaries. If a non-negotiated salary is your benchmark for your first job, even if you negotiate subsequent salaries in your second and third and tenth jobs, employers will be anchoring their opening offer to the latest in a chain of salaries that starts with an unequally lower offer. (But, interestingly, if a job posting does clearly state that a salary is negotiable, women may actually be more likely than men to negotiate their salaries.)
The press coverage of this new law focuses on its most revolutionary aspect, which is forbidding an inquiry into past salaries. But it actually does several other things that you should be aware of if you work in Massachusetts, own a business or a branch there, or if you hire remotely in Massachusetts. So lets look at the law itself.
A big one in my mind is that 105(c)(1) of the new law expressly codifies a rule that employers cannot forbid employees from discussing their pay, inclusive of all forms of compensation such as fringe benefits, or require them not to have such discussions as a condition of employment. At first blush I thought this statement was merely duplicative of existing NLRB rules and the general sentiment of employment law in the 1st Circuit holding the same, but the text itself has a potentially staggering other implication that the legislature may not have intended. Here is that section verbatim:
c) It shall be an unlawful practice for an employer to:
(1) require, as a condition of employment, that an employee refrain from inquiring about, discussing or disclosing information about either the employee’s own wages, including benefits or other compensation, or about any other employee’s wages;
Now, hang on. Isn't the idea that employees at least have the right to discuss their wages amongst themselves to essentially screen a single employer (their own) for discriminatory compensation practices? But this section is not so limited - at all! In fact, it provides no limitation whatsoever on exactly with whom the employee may discuss their own wages or even their co-worker's wages. In theory, this language is so broad that if you have an NDA forbidding an employee from disclosing salary information even to outside, non-governmental actors (like, say, your competitors!), that provision of your NDA may be presumptively unenforceable - or worse, your entire NDA may be invalid.
Fortunately, at least, the law expressly forbids human resources professionals from email-blasting salary information out into the world. But what if an employee outside of HR gets hold of this information, even unscrupulously? Nothing in the law prevents that employee from telling the world everything he or she knows about not just his or her own compensation, but the compensation of everybody at the company.
The potential jeopardy here is huge. What if a coworker has been compensated with stock options, and you are in the middle of a delicate mergers and acquisitions negotiation that requires an information asymmetry about how the company has valued its own stock in the past? What if a key vendor is funding a SPIF for your sales force and all of a sudden the whole world, including competitors who work with the same vendors who might not have as nice a deal, becomes privy to this information?
Obviously, employers cannot protect themselves by trying to keep salary data a secret from employees - your employees in Massachusetts now have a total right to seek this information from each other. No form of compensation is excepted from the law. Perhaps the legislature only intended that this information be an "open secret" among employees, not to be shared with the outside world - but that isn't how it wrote the law. So what can you do?
First and foremost, you will need to engage competent personnel to make sure that your organization, especially supervisors, HR personnel, and anyone with hiring authority is educated in the implications of this law. Maybe you need to revamp your online ordering portal. Maybe you need to refurbish your standard questionnaire. Those old craigslist ads you keep reposting once a week? Double- and triple-check those, and make sure that whoever is sorting through responses to them is fully aware of the implications of this law. There is no safe harbor for innocent mistakes made by employees who screen resumes even if those employees have no hiring authority.
Secondly, review your HR security practices. Maybe it's time to upgrade that old file drawer to a password-protected digital system. If you have outsourced your HR or payroll functions to a third party (as most employers do), get on the phone with them to make sure that they are aware of this new law and ask them what steps they are taking to protect secure information. If you use outside recruiters ,you need to call them too and make sure they are aware that, come January 1 2018 (the effective date of S.2119), they've got to be ready to comply with this new law.
A final word: there is a strong immunization against liability in gender discrimination cases in Massachusetts that you can give yourself now - and which you should have given yourself already! To wit:
(d) An employer against whom an action is brought alleging a violation of subsection (b) and who, within the previous 3 years and prior to the commencement of the action, has both completed a self-evaluation of its pay practices in good faith and can demonstrate that reasonable progress has been made towards eliminating compensation differentials based on gender for comparable work in accordance with that evaluation, shall have an affirmative defense to liability under subsection (b) and to any pay discrimination claim under section 4 of chapter 151B. For purposes of this subsection, an employer’s self-evaluation may be of the employer’s own design, so long as it is reasonable in detail and scope in light of the size of the employer or may be consistent with standard templates or forms issued by the attorney general.
You heard that right: any liability under MGL 151(B)(4), which is Massachusetts' general proscription against discriminatory employment practices, may be mitigated as an affirmative defense (meaning that it is raised at the point of lawsuit or EEOC filing) by a bona fide self-evaluation of pay equity at your company or branch with appropriate remedial measures.
In my opinion, everyone who can afford it should be engaging in such self-evaluation anyway, both to head off potential discrimination liability and because equal pay for equal work is simply the right thing to do. Whether or not you operate in Massachusetts, don't hesitate to contact us right away if you are looking for help designing such a plan. As an employment law attorney barred in Massachusetts, I know that compliance in the Commonwealth can be a pain - and so are the mandatory treble damages you face for most kinds of non-compliance. The price tag isn't worth it, and neither is a reputation as 'that employer who discriminates."
RSS Feed