Equal Pay Audit

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Good Faith Employer Equal Pay Audit

Under the Massachusetts Equal Pay Act a good faith equal pay audit can protect an employer against a wage discrimination claim. This is not expressly stated in the federal statute, but conducting such an audit can still provide a benefit.

What is an Equal Pay Audit?

An equal pay audit is defined under Massachusetts law as a good faith reasonable self evaluation of pay practices and pay equity. The purpose of the audit is to determine if the company is paying men and women equally for equal work.

What Information Should be Part of an Audit?

You should compare pay for those whose work requires substantially similar skill, effort, and responsibility, and is performed under similar working conditions. The job titles do not need to be the same, and the work does not need to be identical.

You should look at total compensation, including base salary and also bonuses or incentive payments. If you are paying employees equally in salary but there are large differences in bonuses, this should be reviewed. These differences should be tied to a seniority system, a merit system, or some other measurement of productivity.

You will also want to look at your hiring practices. Many employers don't know that under Massachusetts law, you are not allowed to ask potential employees about their salary history. The reasoning is that the wage gap is sometimes perpetuated by the difference in salary history. Another reason is to encourage employers to set compensation based on the qualifications of the applicant and the nature of the job, not based on a potentially artificially deflated salary history.
If you have people doing comparable work with pay differences you should assess whether the differences are due to one of the above reasons. If you conclude that there might be a violation of equal pay laws, you can still protect yourself. State law allows you to use this defense if you make "reasonable progress" towards resolving any issues you uncover.

Why Do an Equal Pay Audit?

If you do this right, it will provide an affirmative defense to claims under the Massachusetts equal pay laws. An affirmative defense means you can avoid liability even if the employee proves an equal pay violation.

It is not an affirmative defense to federal claims. It is also not an affirmative defense to claims under other law including discrimination law. Even under those laws, however, showing that you investigated and took reasonable steps to correct any problems found will be helpful in your general defense.

Who Should do the Equal Pay Audit?

There is no requirement that you hire an attorney or outside company to do your audit. The law only requires that it be performed in good faith. It is a good idea, though, to get some outside assistance, for several reasons.

First, part of the analysis will be about the legal standards in the equal pay laws. Equal or comparable work is defined as "substantially similar skill, effort, and responsibility, and is performed under similar working conditions." Understanding what these words mean according to the courts is not something most business people know.
Second, it can be hard to see your own business the same way an outsider would. If you ever face an equal pay complaint, it will be outside eyes judging your pay practices. The best way to assess what you have is by bringing in someone from the outside to assist.
Third, if you are ever in a lawsuit, you may want to have the person who helped with the audit testify to the legitimacy of your practices. This is more credible coming from someone outside the business than if it came from you or your team.
Finally, having an employment lawyer help you with the audit may have some additional benefits. It may turn up other employment law risks in your business you were not aware of. Those could include employees in other protected classes being treated differently, or other wage and hour risks. Knowing this before litigation gives you a chance to manage risk and correct anything that needs correcting.

What if an Employee Complains About Pay Inequity?

This could come up during an audit, or an employee could separately bring up a question or concern. If you are not already working with an attorney for your audit, you should reach out for legal advice immediately. There are a lot of missteps you could make innocently in the process.

You need to know that the equal pay laws make it illegal to punish someone for asserting rights under those laws. Things like terminating the employee, demoting her, or passing her over for additional compensation could be considered retaliation.
You also should know that in Massachusetts you are not allowed to prevent your employees from sharing compensation information with each other. Chances are if someone has raised a concern, they are already speaking with one or more co-workers about their compensation. You need to be careful you do not take any action against these employees for engaging in those conversations.

How We Can Help

We can help you navigate these issues and get clarity on your rights and obligations, and to help with your self evaluation if you are an employer who would like to avoid future liability under the Massachusetts Equal Pay Act.  You can use the button below to schedule a call back from a member of our team, give us a call at  781-784-2322, or fill out our web form  to let us know a little more about your situation.