Maryland’s Amendment Would Expand Equal Pay to Include “Gender Identity,” Strengthen Protections Along Other More Familiar Lines

As we noted in last week’s coverage of Equal Pay Day’s twentieth anniversary, the issue of equal pay has been drawing increasing attention from regulators, legislators and plaintiffs’ attorneys nationwide.  Of particular note, a report issued in January 2016 by the National Women’s Law Center highlighted the unprecedented level of new equal pay legislation at the state level. Leading this wave of activity, both New York’s Achieve Pay Equity law and California’s Fair Pay Act law have in place the broadest protections for employees seeking to bring gender-based equal pay claims.  Additionally, a number of other states have adopted piecemeal legislation addressing equal pay, such as prohibiting employer retaliation based on employee discussions of wages (Connecticut, New Hampshire, Oregon), holding state contractors responsible for certifying their equal pay compliance (Delaware, Minnesota, Oregon), increasing civil penalties for equal pay violations (Illinois), or requiring employers to maintain wage records in anticipation of potential state government inquiries (North Dakota).

Most recently, on April 9, 2016, the Maryland legislature passed House Bill 1003 (HB 1003), which would amend existing equal pay laws in Maryland to provide enhanced protections to employees.  Most striking is that HB 1003 incorporates “gender identity” as a protected category in addition to “sex.”  This legislative push dovetails with ongoing developments regarding protections for transgender and similarly situated individuals in the workplace.  Including “gender identity” as a protected category in the context of equal pay is a striking new development that could significantly expand the scope of equal pay protections in Maryland, and is being applauded by transgender rights advocates.

Beyond the amendments that include provisions related to “gender identity,” HB 1003 proposes a number of changes that mirror similar enactments in other states.  For instance, HB 1003 expands the pool of comparators beyond the same establishment restriction in the federal Equal Pay Act.  It proposes that, for the purposes of comparing wages, employees working “for the same employer at workplaces located in the same county of the State” shall be deemed to be working for the “same establishment.”  This approach closely tracks New York’s Achieve Pay Equity law, and means that the comparison of employee wages may go beyond mere side-by-side comparisons of employees from a single retail or office location.  This also has potential implications for employers operating in multiple locations that have significant differences in compensation based upon geography (i.e., rural v. urban locales).

In addition, HB 1003 narrows the available defenses to equal pay differentials in a manner nearly identical to California’s Fair Pay Act.  In order to establish that pay disparity is based upon “a bona fide factor other than sex or gender identity,” an employer has the burden to demonstrate that the factor: (1) is not derived from a gender-based compensation differential; (2) is job-related and consistent with business necessity; and (3) accounts for the entire differential.

Further, HB 1003 includes a pay secrecy provision prohibiting employers from retaliating against employees for wage-related inquiries.  However, the bill does contain an exception for “an employee who has access to the wage information of other employees as a part of the employee’s essential job functions” unless that employee “discloses . . . information . . . outside the performance of the essential functions of the employee’s job.”  In this regard, HB 1003 closely tracks the pay transparency regulations for federal contractors adopted by the Office of Federal Contract Compliance Programs in January 2016.

It is unclear whether Gov. Lawrence Hogan will ultimately sign the legislation into law. Maryland’s proposal makes clear that employers should take steps to determine where they stand with regard to pay equity, including but not limited to conducting privileged audits and documenting all factors that go into pay decisions.