A growing number of state and local governments have passed equal pay laws in recent years. These statutes and ordinances have varied in their specific content and have created a patchwork of legal requirements vexing employers who are attempting to comply. Two states have added wrinkles to this patchwork. While many of the obligations have favored employees, Massachusetts and Oregon have attempted to tip the scales to employers by creating “safe harbor” provisions aimed at providing some form of relief for employers who perform voluntary pay audits and correct any adverse findings through “safe harbor” provisions. These provisions, however, raise significant questions that employers must consider before concluding that they are fully protected.
Massachusetts’ pay equity law, An Act to Establish Pay Equity, Chapter 177 of the Acts of 2016, amends the Massachusetts Equal Pay Act (“MEPA”), M.G.L. c. 149, § 105A, and took effect on July 1, 2018. The MEPA is one of the strongest and most unique equal pay laws in the nation. We detailed the law’s provisions in a previous blog. To summarize, the amended law (a) provides a broader comparator definition than the federal Equal Pay Act, 29 U.S.C. § 206(d), (b) places a greater burden on employers to justify gender-based wage disparities, and (c) ensures that employers may not prohibit employees from inquiring about, discussing, or otherwise revealing their compensation to other employees. In addition, the new law was the first instance where a state prohibited the use of prior salary in setting compensation, including during the interview process or in an employment application. If an employer violates the MEPA, it will generally be liable for twice the amount of the unpaid wages owed to the affected employee(s), plus reasonable attorneys’ fees and costs.
Safe Harbor: One unique aspect of the amended MEPA is its safe harbor provision. The new law provides employers with an affirmative defense to an equal pay claim if the employer can show it has voluntarily conducted a self-evaluation of its pay systems, and is actively working to combat any discrepancies. Specifically, the law provides, “an employer…who, within the previous 3 years and prior to the commencement of the action, has both completed a self-evaluation of its pay practices in good faith and can demonstrate that reasonable progress has been made towards eliminating wage differentials based on gender for comparable work…shall have an affirmative defense to liability…”. The MEPA does not require employers to conduct self-evaluations or penalize employers who decide against it. The Attorney General has also issued a six-step guide entitled Self-Evaluations—A Basic Guide for Employers for employers who choose to perform the self-evaluation. The guide does not set forth a specific analysis or model that sufficiently meets the safe harbor provisions. Rather, it states that self-evaluations need not be one-size-fits-all and the complexity of the analysis will vary greatly depending on the size, make-up, and resources of each employer. Notably, the guide suggests a time frame for remedial actions; if an employer waits longer than six months to take remedial action, the guidance cautions that the employer risks having the self-evaluation used as evidence against it if an employee files a claim.
Last year, Oregon enacted the Oregon Equal Pay Act of 2017 (“OEPA”), Chapter 197 of the Oregon Laws of 2017. We previously summarized the provisions. In short, the amended law (a) extends “protected class” beyond sex and gender to also include race, color, religion, sexual orientation, national origin, marital status, veteran status, disability, or age, (b) defines work of “comparable character” in nearly the same way as the Title VII standard, (c) authorizes pay differentials only if the differential is based on one of eight specifically enumerated factors—including education, training, or experience—or a combination thereof that accounts for the entire differential. The OEPA also prevents employers from justifying an otherwise unlawful pay disparity on the basis of prior salary. If an employer violates the OEPA, it will generally be liable for back-pay and punitive damages.
Safe Harbor: Like Massachusetts, the Oregon law contains a safe harbor provision for employers. However, the language differs. It provides a safe harbor for an employer which has completed an “equal-pay analysis” within the previous three years, eliminated the pay differential for the plaintiff, and made “substantial progress toward eliminating wage differentials for the protected class asserted by the plaintiff.” This second requirement—eliminating the pay differential for the plaintiff—will make it significantly more difficult for employers to take advantage of the OEPA’s safe harbor. In addition to this stringent requirement, the OEPA’s safe harbor is not a complete defense to an equal pay claim. Meeting the pay equity threshold may shield the employer from some compensatory and punitive damages. Employers may continue to be liable for back-pay and reasonable attorneys’ fees.
These Are Not Safe Harbors From Other Laws:
It is worth cautioning that these laws do not provide a defense to other laws. For example, an employer cannot rely on self-evaluations as a defense to federal equal pay act claims brought under Title VII or a Department of Labor audit under Executive Order 11246. More so, an employer’s claim of privilege may be challenged in other actions if the state treats self-evaluations as privileged only for the limited purpose of complying with state laws.
Questions Arising From Vague Statutory Language:
The vague statutory language in the MEPA and OEPA makes it difficult for employers who want to take advantage of these safe harbor provisions. Some questions raised by the safe harbor provisions include:
- What is a “self-evaluation” of the employer’s pay practices?
- How is “good faith” determined?
- What constitutes “reasonable progress . . .towards eliminating wage differentials based on gender for comparable work”?
- What is an “equal-pay analysis” of the employer’s pay practices?
- What makes an equal-pay analysis “reasonable in detail and in scope in light of the size of the employer”?
- Considering most statistical analyses have some level of unexplained variance, is there a level of difference that would be sufficient to “eliminate” the plaintiff’s pay difference?
- What constitutes “reasonable and substantial progress toward eliminating wage differentials”?
As to both states, and their interplay with other laws, employers will face big questions whether use of the safe harbors waives the privileged nature of internal audits. These complexities, among others, make it essential that employers carefully consider how they will structure and conduct their audits and whether these safe harbor provisions will provide effective defenses to compensation disparity claims. As more jurisdictions draft equal pay legislation, it is unclear whether these safe harbor provisions will bleed into other laws. But experienced counsel should be retained to assist employers in navigating these complex issues.
 Mass. Gen. Laws ch. 149 § 105A(d) (2018).
 Office of the Attorney General, An Act to Establish Pay Equity: Overview and Frequently Asked Questions, Appendix A: Self-Evaluations—A Basic Guide For Employers (March 1, 2018) (available at: https://www.mass.gov/massachusetts-equal-pay-law).
 2017 Or. Laws ch. 197, H.B. 2005 (to be codified in scattered sections of Or. Rev. Stat.).
 Id. sec. 12(1).