Maryland Takes the Lead in Aggressive State Equal Pay Legislation

Last week, Maryland became the most recent state to expand its equal pay protections, when Governor Larry Hogan signed the Equal Pay for Equal Work Act of 2016 (“Equal Pay Act”) into law.  Maryland joins states like New York and California, which have some of the country’s most expansive equal pay protections. Unlike New York and California, Maryland’s law was signed by a Republican governor, which establishes that equal pay efforts have crossed party lines.  The new law introduces two new features into the equal pay fray: gender identity and “work of comparable character.”

Specifically, the law:

  • Adds gender identity to sex as a protected class;
  • Forbids discrimination in pay for “work of comparable character or work on the same operation, in the same
    business or of the same type”;
  • Expands establishment beyond a single facility to include all workplaces in the same county;
  • Forbids providing “less favorable employment opportunities based on sex or gender identity”; and
  • Limits the “other than sex” affirmative defense to bona fide factors that: (1) are not derived from a sex based differential in compensation; (2) are “job related” and “consistent with business necessity”; and (3) account for the entire differential.

The Equal Pay Act also contains pay secrecy provisions that are substantially similar to the pay transparency provisions for federal contractors adopted by the Office of Federal Contract Compliance Programs in January 2016.  This portion of the law prohibits employers from retaliating against employees for wage inquiries.  It contains an exception for employees with “access to the wage information of other employees,” unless the disclosure is based on information that was “obtained outside the performance of the essential functions of the employee’s job.”

Taken as a whole, Maryland can now claim one of the broadest equal pay frameworks in the country which will create difficult compliance challenges for employers.  First, the addition of gender identity has no guidelines and fails to address whether a claimant has to establish that the employer knew of the claimant’s gender identity where it is neither obvious nor known.  Second, determining what work is of a “comparable character” poses significant challenges.  While California’s law using “substantially similar” is grounded somewhat in Title VII terms, Maryland’s “comparable character” standard has little recent legal precedent. Plaintiff’s lawyers may claim that the term establishes a comparable worth standard.  However, the absence of the word “worth” suggests that the legislature and the governor did not intend to go that far.

Further, the prohibition of assigning a worker to a “less favorable career track” based upon their sex or gender identity is ambiguous.  While ostensibly geared towards mothers who may adjust their jobs to accommodate child care responsibilities, the term “career tracks” could be interpreted in any number of ways.  Also, it is not clear whether “career tracks” are discriminatory at all if both women and men—who increasingly share child care responsibilities—take advantage of them.  Finally, the added burdens placed on employers in relation to the defenses raise the same concerns as those posed in California and, to some extent, in New York regarding increased scrutiny over what factors (i.e., prior salary, starting salary, market factors) employers can legitimately use to determine pay.

In addition to the Equal Pay Act, Governor Hogan also signed the Equal Pay Commission Establishment Act (“Commission Act”) into law, thereby creating the Equal Pay Commission of the Maryland Division of Labor and Industry (“Commission”).  The Commission members will be appointed by the governor of the Maryland, and drawn from the Maryland business community, labor organization representatives (as nominated by labor federations), and other relevant organizations.  The Commission is empowered to implement a number of different initiatives under the new law, including: (1) evaluate the extent of wage disparities in the public and private sectors; (2) establish wage data collection mechanisms with employers; (3) develop strategy to determine equal pay best practices; (4) recommend options for streamlining available administrative and legal remedies; (5) foster partnerships with private industry; and (6) share data (most specifically in an annual report to be delivered to the state government on December 15 of each year, beginning with 2017).

Passage of the Equal Pay Act in Maryland may reverberate in New Jersey.  While Governor Chris Christie did not sign the New Jersey bill, pressure to revisit the issue may increase now that a fellow Republican governor has signed onto the equal pay arms race. Maryland’s new law is not set to take effect until October 1, 2016, so Maryland employers will have a limited opportunity to craft appropriate policy—and potentially economic—responses during the next four months.  Accordingly, employers should begin reviewing their pay policies and practices to comply with this new law.