An act to establish pay equity

Compliance for Massachusetts small businesses

An Act to establish pay equity (M.G.L.c.177; MA S.2119), signed into law in August, is a well intention bill aimed at redressing gender pay disparities in the Bay State. An overview and societal perspective is available from the NY Times and Think Progress.

The purpose of this article is to cover compliance from the perspective of an engineering hiring manager at a small company. For those in similar positions, bearing the compliance burden with limited or no HR support, this is my take on what you need to know to comply.¹

I also cover some of the concrete steps MA government could take to make the compliance situation more tenable for small businesses.

How to comply

Date to remember: July 1, 2018

The law takes effect in ~2 years.

Interviewers

Ask: What are your salary expectations?
Do not ask: How much did you earn with your previous employer?

The most important compliance provision is in the phrasing of the ‘salary question.’ Interviewers may use previous salary, a question like “what do you make” as a proxy for salary expectations. In my experience, the aim is to see if the employer/employee are in the same salary ball park.²

Per §105A(c), these sorts of questions are now illegal in MA. Further, you may only inquire with previous employers with a written waiver after an offer with salary has been extended. Candidates may still voluntarily disclose.

A more transparent option would be to post salary ranges up-front.³
Pro: Encourages fairness in negotiations, particularly with minority candidates, e.g. this article.
Con: Candidates may adversely self-select; not applying for great-fit positions because the pay is perceived as too high (or too low).

Hiring Manager / HR

Do: Complete a self-evaluation for existing employees, before January 2018

Recommend: Statue allows 3 years, but I’d recommend performing the self-evaluation at every company-wide pay review, usually annually (e.g. annual COLA).

Recommend: Self-evaluate pay ranges for each new job description. Apply the standard internal vs external equity considerations. This will make the annual updating much easier.

Do not: “Wing” compensation. Bad practice before, now potentially illegal.

§105A(b) highly restricts the allowable sources of compensation differentials. Further, employees need not have filled a discrimination claim via the normal channels to seek punitive redress.

§105A(d) does include an affirmative defense (not a safe harbor!) via self-evaluation. The self-evaluation policy should be written, and the results documented.

  • Self-evaluations do not provide affirmative defense for 6 months, so to avoid a gap complete your self-assessment by January 2018.
  • Self-evaluations only apply to §105A(b), not §105A(c), highlighting the importance of interviewer training on what not to ask.

Issues for small employers

No exemption for small employers

In light of the heavy compliance burden, most other sweeping federal and MA legislation have provisions exempting small employers, e.g.

There is no such employee headcount exemption.

No safe harbor

An affirmative defense provision is included in §105A(d), but this falls well short of a true safe harbor.

No requirement to file a discrimination claim

Both the Federal government (EEOC) and the MA Commission Against Discrimination (MCAD) have processes in-place for dealing with claims of discrimination. For example, sex and gender identity are already covered-forms of discrimination under M.G.L.c.151B sec.4. Indeed, MCAD has a clear filling and complaint process, including reasonable accommodation provisions.

The new law circumvents these processes, stating: “a plaintiff shall not be required to file a charge of discrimination with the Massachusetts Commission Against Discrimination as a prerequisite to bringing an action under this section.”

What MA can do

The Attorney General, Labor & Workforce Development (LWD), and the Massachusetts Commission Against Discrimination (MCAD) should take concrete steps now to help small employers with compliance. Everything should be freely available on the web.

I would love to see…

Sample self-evaluation policy

Given the “in light of the size” language in §105A(d); ideally, there would be two sample policies. One pertaining to small organisations (<20 employees), the other to medium-sized organisations (20–200).

Information on free compensation data sources would also be greatly appreciated. As it stands, I suspect many small employers have difficulty creating sensible salary bands due to the paucity of granular data. BLS data is nigh useless because it’s so high-level. AngelList is the only data source I’m aware of that provides granular data relevant to small start-ups. Glassdoor and Payscale (underlying data obscured; dubious) have some data available, but they really only capture large employers.

Compliance quick-start guide

A 1–3 page quick-start summary detailing applicable state/federal law, and importantly at what company-size it applies, should be made available. It should be updated yearly, and should be sent to companies registered addresses by mail when registering for an MA business licence.

I believe such a quick-start guide would go a long way towards helping small companies orient-themselves in an every shifting and bewildering legislative landscape.

More active out-reach to small business, e.g. via free online video

The small-business training and out-reach programs of the Massachusetts Commission Against Discrimination are infrequent and expensive. Why not make video of the presentations freely available online? Could go even further and allow users to opt-in to being noted as having watched the video training.

Ideally, the courts would hold viewing this video training as indicia of “good faith” pursuant to §105A(d). Naturally, per the self-evaluation admissibility clause, opting-out of or not watching the video should not be admissible.


[1] I am a scientist and engineer, with no formal background in Human Resources or law. My goal is to build awesome products by recruiting, developing and retaining a kick ass team of engineers. Simply doing my best to comply with the myriad of applicable state and federal labor laws. Opinions are solely my own. YMMV.

[2] Recruiting is expensive, in time and opportunity cost. It’s best to avoid over-investing in a candidate who doesn’t fit with the employer value proposition. As comp is one aspect of employer value proposition, it’s advisable to get a sense of expectations early in the process. What you want to avoid is the pain of a late-stage comp discussion sinking a great hire at offer stage.

[3]: I personally admire AngelList for requiring up-front salary and equity.