From JDSupra, Daniel Klein, Hillary Massey, Barry Miller, Emily Miller, and Maria Papasevastos discuss a bill in the Massachusetts legislature that would require employers to provide pay scales. Daniel, Hillary, Barry, Emily and Maria write:
Seyfarth Synopsis: Proposed legislation would require many employers in Massachusetts to provide pay scales to prospective and current employees.
A bill pending before the Massachusetts Legislature would add obligations to the Massachusetts Equal Pay Act requiring employers to provide information on the pay range for a given position to employees or applicants upon request. This proposed legislation raises a number of questions about new compliance obligations that employers may soon face, along with practical questions about the enforceability of those new requirements.
Under the proposed legislation (H 1950 / S 1208), employers with 50 or more employees would be required to provide current employees and job candidates with pay scale information for the positions they hold or for which they are interviewing. “Pay scale” is defined as “a salary or hourly wage range for such position.” As currently drafted, the requirement would be triggered when an interviewee or employee makes a “reasonable request” for the information, which is defined as a request by an applicant upon an invitation to be interviewed or anytime thereafter during the hiring process, or a request by an employee regarding the employee’s current position.
Proponents of the legislation hope it will level the playing field by providing a starting place for prospective and current employees to understand an employer’s valuation of the position – though the ultimate value of that exercise is yet to be determined.
Massachusetts has been a trailblazer on the issue of pay equity in recent years, including being the first state to create a compelling incentive for employers to conduct their own pay equity analyses by providing an affirmative defense in litigation to employers that conduct such audits. On the issue of pay range disclosures, this legislation would add Massachusetts to a number of jurisdictions that have recently enacted similar laws, including California, Colorado, Connecticut (effective October 1, 2021), Maryland, Nevada (effective October 1, 2021), Washington State, the City of Toledo, and the City of Cincinnati.
A Range of Considerations
For some employers, this exercise in generating a pay scale will not be as simple as pulling back the curtain and revealing the figures. For many employers, responding to requests for pay ranges may be a creative writing exercise with no clear rules or boundaries. While large and sophisticated employers often have substantial infrastructure tasked with overseeing employee compensation or “total rewards,” many smaller employers do not have established compensation ranges for the positions they maintain or even those they seek to fill. For such organizations, given the wide range of applicants who may apply for an open role, an honest range that covers everyone from a satisfactory to an ideal candidate could be vast. The bill does not address how an employer that has no established pay scale for a position might respond to an employee or applicant’s request. Notably, the bill also pertains only to salary and hourly compensation, seeming to leave outside of its reach positions that are paid in whole or in part on a commission basis or that are eligible for large bonuses or other forms of compensation.
The pending Massachusetts legislation is succinct, and the text of the bill leaves many questions unanswered. One such question is how precise a “pay scale” for a job must be. In Colorado, for instance, the Department of Labor has explained that although the ranges need to be reasonable, good faith estimates, employers need not be confined by them: An employer can pay someone wages that fall outside the posted range without necessarily running afoul of the statute. The pending Massachusetts legislation does not address these considerations, arguably leaving open the prospect of employers adopting very wide pay ranges that would provide no useful information to an applicant or employee seeking to assess his or her compensation, relative to others in the role. The Massachusetts Equal Pay Act authorizes the Attorney General to issue regulations interpreting the statute, potentially filling those gaps, which raises further questions about how onerous these disclosure requirements may ultimately be.
It is difficult to say at this juncture how Massachusetts would enforce this law. The proposed amendment provides no independent penalty for failing to provide pay ranges as required. While the existing text of the Equal Pay Act has provisions for civil enforcement and actions by the Attorney General to collect “unpaid wages,” the relationship between disclosure of a pay range and “unpaid wages” is unclear and appears attenuated, at best.
Notwithstanding, the proposed legislation could open employers to a new world of disputes with prospective and current employees who believe they are underpaid, given what they now know their employer may have been willing to pay someone else. This could prove particularly challenging in the context of sharing pay range information with current employees.
As this bill makes its way through the Legislature, employers seeking to stay ahead of the curve on pay equity matters should begin to assess any established pay ranges that they have in place or consider whether developing such ranges is appropriate for their workforce. Regardless of the fate of this particular bill, pay equity remains one of the fastest moving areas of American employment law; and states’ adoption of pay transparency laws appears to be the new trend in pay equity. The best thing that an employer can do to be prepared for such continuing developments is to partner with counsel to conduct a pay equity audit, and identify and remedy potential pay disparities before they become legal disputes.
As always, Seyfarth’s Pay Equity Group’s attorneys are available to assist employers in navigating these new requirements and ensuring that they are ready for the ongoing trend toward greater pay transparency generally.