Personal Finance

What Massachusetts’ New Hiring Law Means for You

law bookThe state of Massachusetts is the first to pass a transformative new law aimed at closing the wage gap that exists between men and women in the United States. The main function of this new legislation is designed to prevent employers from asking about the salary histories of applicants prior to extending them an offer for a job. It’s one of the most stringent laws that has ever been passed.

Under the mandates of Bill S.2119, also known as The Act to Establish Pay Equity, hiring managers must provide an applicant with a compensation figure before inquiring as to his or her salary in previous employment positions. The goal is to force an employer to come up with a compensation arrangement that is concurrent with the applicant’s worth to an organization instead of that person’s former income at another company.

The Pay Equity Law

This law seeks to accomplish two main things.  It (1) requires employers that are based within the Commonwealth to offer equal compensation to men and women for comparable work and (2) prohibits those employers from asking about an applicant’s salary history in his or her previous roles.

The legislation was signed into law by Massachusetts Governor Charlie Baker after it was passed with bipartisan support.  It garnered support from both Democrats and Republicans because it focuses on eliminating the long-term problem the gender wage gap, wherein men earn more money than women for the same job. The Pay Equity Law also gives employers the chance to put forth an affirmative defense to wage claims as determined by that employer’s own self-assessment of its compensation practices.

Although the new law still has nearly two years before it goes into effect on July 1, 2018, it is already being hailed as a model for other states to adopt.  The law puts an emphasis on “advancing more equal, inclusive and thriving workplaces throughout the Commonwealth for women and families”, according to Massachusetts Lt. Governor Karyn Polito. The new law gives Massachusetts employers ample time to begin the self-evaluations of their payment practices under the comparable work mandate.  Legal experts have suggested that these companies begin doing so ahead of the July 2018 start.

Equal Pay for ‘Comparable Work’

Section 105A of Bill S.2119 describes the term “comparable work” 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”.

The wording of the definition is very important because it cuts right to the heart of the wage gap problem in America. According to the national government, women earn roughly an average of 79 cents for each dollar a man earns at a full-time, year-round job. While that figure is a broad-stroke estimate that doesn’t point to specific factors such as age, experience, or job position, the wage gap tightens only ever so slightly when salaries of men and women in “similar skill, effort and responsibility and is performed under similar working conditions” (as per the definition in the Pay Equity Law) are compared with one another. For Massachusetts in particular, women make slightly more than the national figure with an average of 82 cents for every dollar earned by men.

However, while Massachusetts has been the bellwether for passing a law of this kind, there have been other efforts around the country to enact similar legislation elsewhere. Unfortunately, none of them have made it far enough to become law, usually under the reasoning that the United States already has equal pay laws in effect throughout the U.S.

The problem with the majority of those statutes is that they lack the proper language and support for strict enforcement.  Unfortunately, violations are nearly impossible to identify and too many industries have wage gaps that would need to be eliminated under the loose wording of those laws.

Massachusetts’ Pay Equity Law takes the potential for discrimination, implicit or otherwise, out of the equation entirely by preventing employers from asking about salary histories. Potential candidates may be interviewed on topics such as training, experience, and education among other qualifying factors to help employers decide on who to hire and what to pay them.

Prohibiting those employers from asking about previous compensation breaks the cycle of lowered salaries that all too often limit the earnings potential of women and minorities throughout the duration of the careers. This is in large part due to companies relying on a candidate’s previous compensation package as a main determining factor in how much of a salary they will offer a new hire.

With this question now barred from the conversation until an offer sheet has been extended to the applicant, that candidate will be paid what they deserve as determined by what the company believes they are worth.  These figures are based solely on experience and the other relevant factors that have been previously mentioned.

The law also brings additional provisions that are put in place to protect employees from being unfairly discriminated against for compensation. Under the new regulations of S.2119, companies may not prevent employees from disclosing their salaries to other parties which could help promote salary transparency and put the power back with the employees in uncovering salary inequality.

Massachusetts already has a law on the books that’s similar to 12 additional states, where employees are allowed to discuss salaries among themselves freely if they wish. Of course, despite all of these stringent laws and regulations in place as part of the Pay Equity Law, employees are free to offer up their salary histories during the interview process if they so choose. They just can’t be asked about them.

young woman worried about moneyThe Paycheck Fairness Act

There have been attempts made to pass a national anti-secrecy law, titled the Paycheck Fairness Act, which would promote even greater salary transparency. Those efforts have been repeatedly stifled by Republicans in Congress citing anti-discrimination laws that are already in place and calling any additional measures redundant.

However, the Paycheck Fairness Act would make it a federal violation to penalize employees from discussing their salaries and require the Equal Employment Opportunity Commission to gather information on salary disparities from employers. As of now, these laws are being enacted in varying degrees at the state levels only, with Massachusetts, California, and Maryland making some of the most progress in narrowing the wage gap.

More States Adopting Similar Protections

Massachusetts is a trailblazer with the enactment of their pay equity bill, but other states have passed related legislation that works to close the wage gap, but does so in different ways. Maryland, for instance, passed a law in May of 2016 which required equal pay for employees of either gender who were doing “comparable” work under very similar definitions of the term to the Massachusetts law.

California has also made some strides in combating wage disparities with a law that brought some of the strictest regulations in the country. Their legislation mandates that employers are able to demonstrate an ability to produce proof of equal pay practices among workers of each gender who hold “substantially similar” job positions. The law had the full support of multiple California based trade groups including the Chamber of Commerce.

This part of the California law is in line with the expectations of companies to behave in accordance with the Massachusetts bill as they do their self-assessments surrounding pay disparities within the organization. Although they won’t need to start reporting until the law takes effect in 2018, employers must be able to prove they are making progress in the elimination of highly disparate wages for men and women who are employed in positions where they are doing “comparable work” as defined in the Pay Equity Law.

Wage Variations Permitted Under S.2119

Although the Pay Equity Act is written to eliminate wage inequality based upon gender, there are some permissible wage variations allowed as long as they apply under any of the factors that have been set forth as part of the language contained within S.2119. These six factors vary, with the first being any workers who have earned seniority in the current employer system with the stipulation that any allowances for pregnancy, family or medical leave, or other protected time spent does not reduce that seniority qualification.

In addition, a merit system qualifies under the language of the statute, as does any employment system where earnings are determined by quantity or quality of production, sales, or revenue, the geographic location of the job, travel that is routine and expected component of performing the duties of the job, and any necessary education, training, or experience reasonably related to the position.

What the Law Means for Affected Employees

Now that we have an overall understanding of the Pay Equity Act and what it’s been designed to accomplish, you may now be wondering how that affects you, if you are a citizen of Massachusetts. Under the law, S.2119 gives the Attorney General certain powers of authority to enforce the rules set forth in the Act on the part of one or more employees who feel the mandates have been violated.

These employees are also granted the right to recover damages in equal amount of their unpaid wages, liquidated damages that are equal to the amount of any unpaid wages, along with court costs and attorney fees. The statute of limitations on offenses has also been extended to a three year term instead of just one as was prescribed under the laws up until the enactment of the Pay Equity Act. Employees wishing to pursue legal recourse do not have to file a claim with the Massachusetts Commission Against Discrimination before taking legal action.

Arguments Against the Pay Equity Law

As encouraging as all of this sounds, there are detractors who oppose many facets of the bill.  These foes label the Pay Equity Law as a redundant measure to laws that are already on the books that bar gender discrimination in the workplace. Many of these opponents feel that S.2119 is nothing short of an opportunity to engage in frivolous lawsuits, mainly as a result of the extended statute of limitations.

The component of the new law that increases the statute of limitations regarding gender discrimination to three years could give potential accusers additional time for claiming a violation and it comes with no requirements for paying any filing fees before an attorney general can bring a suit to court. This lack of financial participation could potentially open the doors to more individuals filing lawsuits that have little to no merit.

Another concern is that the law could actually hurt female employees who work on commission if those arrangements don’t meet the minimum requirements for what is defined as a proper payment plan under the new law. For opponents of the bill, they feel that such a plan is not clearly explained in the law and it could be left to the courts to make the delineation as to what a fair commission arrangement should look like. They feel that should be the sole decision of the employer and anything other than that is nothing more than government interference.

The Gender Pay Gap

Every year, gender equality advocacy groups mark Equal Pay Day. This is a day intended to raise awareness to the wage disparities that exist between men and women and how much they earn annually. The day is used as a barometer to demonstrate how much further into each year that women in the workforce must continue to work just so they can earn the same amount as men in the previous year. Since the disparities of salaries between the two sexes fluctuate, the day is marked on a different date annually.

As this day is recognized, it also serves as a reminder of how much work still must be done in recognizing the efforts of women to earn as much as their male counterparts. Since the year 2000, the ratio for women’s compensation has been an average 79 cents to every dollar a man earns. In the last 16 years, that percentage has remained mostly constant with a shift of two to three cents higher or lower each year up until the present.

These limitations on a woman’s earning potential illustrate the various obstacles that they face in the workforce every year. They’re getting paid less to do the same level and quantity of work as their male counterparts, being offered more low-wage positions, and they’re subject to wage penalties simply for deciding to become a mother by taking a short leave of absence to have a child.

That’s hardly the extent of it as race and ethnicity play major roles in the wage gap as well. In 2014, African-American women were making only 60 cents and Hispanic women less at 55 cents for every one dollar earned by a white Caucasian male. The only ethnic group who surpassed all others were women of Asian descent who were earning 84 cents on the dollar.

Financial growth conceptDollars and Cents

To get a closer look at the wage gap in terms of numbers, consider the median incomes of men and women in the year 2014. For both genders, working full-time jobs, men earned $50,383 and women made $39,261 for the year. Do the math and you’ll find a difference of $10,762, divide that by 12 months and it comes out to $897 a month being denied women for performing the same work.

More than any figure, this illustrates the risks unfairly placed on women as it makes it tougher for them to make ends meet and puts retirement further out of reach. Closing this gap would also have a dramatic effect on the poverty rates in this country, lowering them in just about every state throughout the U.S., according to the Institute of Women’s Policy Research.

A reduction of the current disparities would also have a positive effect on the economy at large as well, not just on women who are seeking to be paid a fair salary for performing similar work as men in the workplace.  Also, as more women are becoming the primary breadwinners for their family, any improvement on earnings potential will benefit their entire family.

Unfortunately, the reality is still a stark contrast to that which advocates such as the Institute of Women’s Policy Research and the U.S. Chamber of Commerce are trying to rectify with respect to wages earned by women. A study by hiring firm Glassdoor identified that women make an average of 2 to 7 cents less per every dollar earned by men in 25 of the biggest industries with the worst examples of discrepancy found in job positions that require higher levels of training and skilled experience.

The medical field is one of the worst examples with men in a number of specialties from ophthalmology to cardiologists making anywhere from 29% to 38% more than their female colleagues. Technology is another field where the wage gap is one of the widest with women making an average of 72 cents for every dollar earned by men in the industry.

It’s not like this in every occupation, however, as women do make more than men in a few fields. Social work is one of these such industries, as women traditionally earn more at a rate of $1.08 for every one dollar earned by males in the same position.

These figures demonstrate the disparities for women in full-time positions doing “comparable work”. When you look at a comparison between men and women with the same exact job title at similar organizations with the same qualifications, the wage gap narrows considerably. It still, however, displays an unfair advantage favored towards men.

The difference between the two genders is five cents with women making 95 cents for every dollar earned by men. The reasons for this incremental number are hard to pin down, with simple workplace bias to sacrificing that amount of money annually for better scheduling flexibility at a company willing to offer it being some of the possibilities.

The Equal Pay Pledge

In June of 2016, 28 major corporations, including American Airlines, Amazon, Cisco, the Dow Chemical Company, Gap Inc., Johnson & Johnson, L’Oréal USA, and PepsiCo, signed the Equal Pay Pledge.  This pledge is an initiative backed by the White House for American companies to promote wage equality by performing annual audits of the salaries of the men and women who make up their workforce.

The goal is to identify where disparities exist and work towards reducing them with a goal of eliminating the wage gap entirely. With so many major global brands making a commitment towards fixing the problem, the hope is that more companies along a wider swath of industries will follow suit.

Taking these bold steps will not only help women in these firms earn what they deserve, but also enable them to reach higher levels within the organization through promotions to more impressive job titles and into positions of senior leadership roles.

Our Final Thoughts

The wage gap in this country is a very real problem that isn’t fully acknowledged or rectified through existing legislation against gender discrimination. It couldn’t be more evident once you consider the statistics that have stayed mostly consistent for the past three decades.

While it’s true there has been some progress made, it’s far too little to make much of an impact and certainly insufficient to keep hard-working women from being held back solely because of their gender. The Pay Equity Law of Massachusetts is the first real legislation aimed at ending the current cycle of wage disparity by taking out the link that keeps women and minorities from advancing in their chosen field and earning what they’re truly worth.

By prohibiting employers from using previous salaries as the base line for offers of compensation to new hires, the law is allowing women and minorities to pursue employment opportunities on equal footing with their male counterparts and empowering them to reach their true earning potential. No longer will their earning potential be impacted by a former employer’s salary offering which was based on any number of possible biases or determining factors that undermine the long term success of women in the workforce.

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