Comparator Standards Under New State Equal Pay Laws

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2 Comparator Standards Under New State Equal Pay Laws March 2018 Kathryn G. Mantoan T E kmantoan@orrick.com

3 Orrick, Herrington & Sutcliffe LLP The Orrick Builiding 405 Howard Street San Francisco, CA orrick.com I. Introduction In recent years, a number of states and municipalities have enacted laws directed at ensuring equal pay, pay transparency, or both. Multi-jurisdictional employers now need to contend not only with the obligations imposed by the federal Equal Pay Act (29 U.S.C. 206(d)) ( EPA ) and Title VII of the Civil Rights of 1964 (42 U.S.C. 2000e-2), but a patchwork of requirements imposed by these new local laws as well. This paper examines one particular compliance challenge posed by these new laws: the differing terms and definitions delineating the employees whose pay must be equalized under these statutes. Whether an employer s obligation to equalize pay extends to employees who perform equal work, substantially similar work, or comparable work and what (if any) difference in scope those terms suggest is not fully resolved by the text or history of these statutes, or the limited guidance available to date interpreting them. Consequently, this paper analyzes a few of the recently enacted or amended comparator standards, discusses some of the interpretive tools resources currently available, and closes with thoughts on the implications of these standards for employers whose workforces extend across state and municipal boundaries. II. Comparing the Comparators A. California On January 1, 2016, California amended its existing equal pay law (California Labor Code section ) through the California Fair Pay Act ( FPA ). The FPA modifies the statute s comparator standard from one that compares the pay of employees who perform equal work to one that compares the pay of employees who perform substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions. 1 The legislative findings accompanying the FPA suggest that the then-existing state equal pay law had been rarely utilized because the current statutory language [made] it difficult to establish a successful claim. 2 Thus, the findings clearly contemplate some expansion of the existing comparator standards. The original version of the FPA would have changed the equal work standard to comparable work on jobs the performance of which requires comparable skill, effort, and responsibility. 3 However, this language was deleted from the bill following input from various opponents to the standard, particularly the 1 CAL. LAB. CODE (a). 2 S.B. 358, available at 3 S.B. 358 (as introduced, Feb. 24, 2015), available at

4 California Chamber of Commerce, which argued that determining comparable work for different job duties can be extremely subjective, leading to different interpretations and thus the potential for litigation. 4 The amendment process thus clearly moved away from a comparable work standard. Instead, the final bill incorporated the standard of substantially similar work when viewed as a composite of skill, effort, and responsibility. The reference to a composite of factors does not appear in other state or federal equal pay laws, and is undefined in the statute or any of the bill analyses that preceded its adoption. The California Department of Industrial Relations guidance on the meaning of the standard does not address the composite concept, either: Substantially similar work refers to work that is mostly similar in skill, effort, responsibility, and performed under similar working conditions. Skill refers to the experience, ability, education, and training required to perform the job. Effort refers to the amount of physical or mental exertion needed to perform the job. Responsibility refers to the degree of accountability or duties required in performing the job. 5 And in any event, this guidance has not been applied in any court or administrative agency decisions to date. Absent any contrary guidance, the substantially similar standard should be understood to mirror the familiar standard under Title VII. 6 The California Pay Equity Task Force a statewide, multi-stakeholder group seeking to facilitate a dialogue about pay equity among a wide range of advocates, experts, and policymakers, and including as members the California Labor Commissioner, state legislators, and the Director of the California Department of Fair Employment and Housing has been working to develop a Step-by-Step Job Evaluation Template for Employers to Determine Wage Rates. 7 In determining whether employees are performing substantially similar work, the Task Force suggests that employers begin by group[ing] together those positions that require the same skill, effort and responsibility (when viewed as a composite) based on function (e.g., HR, Legal, Marketing, etc.) and role from entry level to VP (e.g., assistant, director, vice president). 8 But the Task Force makes clear that this would likely serve only as a starting point under the new law. It suggests that employers further: 4 State of California, Senate Comm. on Lab. and Indus. Relations, S.B. 358 Bill Analysis (Apr. 20, 2015), available at This concern is in keeping with pronouncements from the U.S. Supreme Court, which has been careful to underscore its reluctance to endorse the controversial concept of comparable worth, under which plaintiffs might claim increased compensation on the basis of a comparison of the intrinsic worth or difficulty of their job with that of other jobs in the same organization or community. Washington Cty. v. Gunther, 452 U.S. 161, 166 (1981). 5 State of California, Dep t of Industrial Relations, California Equal Pay Act: Frequently Asked Questions (Oct. 2017), available at 6 See, e.g., E.E.O.C. v. Bloomberg, L.P., 778 F. Supp. 2d 458, 483 (S.D.N.Y. 2011) (under Title VII, [m]aking a comparison to similarly situated employees is essential to proving a discrimination case because it is only illegal to treat employees of a protected class differently from similarly situated employees ); Moran v. Selig, 447 F.3d 748, 755 (9th Cir. 2006). 7 State of California, California Comm n on the Status of Women and Girls, California Pay Equity Task Force, Agenda and Meeting Binder, at (Jan. 10, 2018), available at Meeting-Packet-.pdf. 8 Id. at

5 Ask yourself when grouping positions, Is the position fungible? Can you move someone from one position to another? Ask, Does this position involve the same depth, or breadth of scope? Does the role require the same skill, effort and responsibility? Consider whether relying on job family is consistent with whether the job requires the same skill, effort, and responsibility when viewed as a composite and performed under similar working conditions. 9 This nuanced, employer- and position-specific approach to evaluating proper comparators is also consistent with the approach dictated by Title VII, which may serve as a source of instructive precedent as courts begin to apply the new California law. B. Maryland Effective October 1, 2016, Maryland also amended its existing equal pay law ( MEPA ). Maryland law has long stated it compares the pay of employees who perform work of a comparable character or work on the same operation, in the same business, or of the same type. 10 But courts in Maryland have historically looked to federal EPA case law to interpret the state law standard. Thus, despite differences in language, Maryland courts have applied the same analysis in reviewing MEPA and EPA claims and required a plaintiff to prove that she and her purported comparator hold jobs that require equal skill, effort, and responsibility. 11 That language remains unchanged in the amended equal pay law. The 2016 amendments do broaden the comparator standard in other ways, however, to include gender identity as well as sex, and to broaden the definition of establishment to include all related workplaces in the same county. 12 Two other features of the Maryland amendments bear mention. First, they include a separate, explicit prohibition on providing less favorable employment opportunities to someone based on her sex or gender identity, defined to include assigning or directing the employee into a less favorable career track [ ] or position and limiting or depriving an employee of employment opportunities that would otherwise be available to the employee but for the employee s sex or gender identity. 13 Other state equal pay laws California, for example lack any such prohibition. This distinction could be important in cases where an employee alleges an equal pay violation based on allegations that she was assigned to do particular work that is less well compensated, as such allegations may state a claim under some state equal pay laws but not other laws that focus exclusively on the content and comparison of work performed. Second, in addition to MEPA amendments, Maryland also passed the Equal Pay Commission Establishment Act into law, thereby creating the Equal Pay Commission ( Commission ) within the Maryland 9 Id. 10 MD. CODE ANN., LAB. & EMP Glunt v. GES Exposition Servs., 123 F. Supp. 2d 847, (D. Md. 2000); Cohens v. Md. Dep t of Human Res., 933 F. Supp. 2d 735, 747 (D. Md. 2013); accord Nixon v. State, 96 Md. App. 485, (1993). 12 MD. CODE ANN., LAB. & EMP Id

6 Division of Labor and Industry. 14 The governor of Maryland will appoint the Commission membership and draw 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) evaluating the extent of wage disparities in the public and private sectors; (2) establishing wage data collection mechanisms with employers; (3) developing strategy to determine equal pay best practices; (4) recommending options for streamlining available administrative and legal remedies; (5) fostering partnerships with private industry; and (6) sharing data and findings with the Commissioner to assist in enforcement actions. 15 The law also directs the Commission to submit an annual report of findings and recommendations, including any recommended legislation, to the governor and legislature. 16 Time will tell how these reports will be structured and what, if any, recommendations are made for further modifications to Maryland s equal pay law. C. Massachusetts Massachusetts also has amended its prior equal pay law with a new statute that takes effect July 1, The new law s comparator standard states it compares the pay of employees of different genders who perform comparable work the language rejected by the California legislature and interpreted as equal work by Maryland courts. 17 But the revision adds an explicit definition of comparable work to mean 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. 18 Although the law has not yet gone into effect, the Massachusetts Attorney General s Office has already issued a guidance document providing examples to interpreting the Act s scope. 19 Although this guidance states that it does not constitute legal advice and does not set forth enforceable regulations and, it provides insight into how the Attorney General s office is likely to proceed in enforcing the Act. The Attorney General s guidance is explicit that, in its view, [c]omparable work is broader and more inclusive than the equal work standard of the federal Equal Pay Act. 20 Thus, although the comparator 14 Id Id. 16 Id. 17 MASS. GEN. LAWS ANN. ch. 149, 105A. Note that the term comparable work appeared in the earlier version of the Massachusetts law, as part of the more cumbersome phrase work of like or comparable character or work on like or comparable operations. 18 Id. Similarly, Oregon s new equal pay law effective January 1, 2019 requires equal wages for work of comparable character, but defines that term to mean work that requires substantially similar knowledge, skill, effort, responsibility and working conditions in the performance of work, regardless of job description or job title. OR. REV. STAT. ANN , These enactments are consistent with case law and other pronouncements that reject uncritical reliance on job title alone to identify comparators. See, e.g., Sims-Fingers v. City of Indianapolis, 493 F.3d 768, 772 (7th Cir. 2007); Coser v. Moore, 739 F.2d 746, 753 (2d Cir. 1984); accord California Pay Equity Task Force, supra note 7, at 57 ( Job titles and job descriptions are relevant to the consideration, but not determinative of whether employees are performing substantially similar work. ). 19 Commonwealth of Massachusetts, Office of the Att y General, An Act to Establish Pay Equity: Overview and Frequently Asked Questions (Mar. 1, 2018), available at 20 Id. at

7 standards in the Maryland and Massachusetts laws are articulated in terms of comparable work, it appears likely that their scope will be interpreted differently in the two jurisdictions. The Attorney General further suggests that work should be considered substantially similar only where each of the factors being considered in this case: skill, effort, and responsibility are alike to a great or significant extent, though they need not be identical or alike in all respects. 21 However, the Attorney General proceeds to provide illustrative examples that suggest that the level of skill required and not the particular skills themselves might be the touchstone in identifying proper comparators: For example [i]n an elementary school setting, janitorial and food service jobs generally do not require previous experience in the field or specialized training, and therefore may require comparable skills, even though the substance of the two jobs is different. 22 The Attorney General s suggestion that the substance of two jobs may differ and yet the jobs nevertheless may be substantially similar within the meaning of the Act arguably does not comport with the plain language of the statute, however. The Massachusetts law has two other features that that may serve as vehicles for the comparator standard to be further developed. The law attempts to incentivize employers to conduct internal pay analyses proactively. In particular, an employer sued under the equal pay law has a complete defense to liability for pay discrimination if it can demonstrate that both that it has completed a self-evaluation of its pay practices in good faith and that reasonable progress has been made towards eliminating wage differentials based on gender for comparable work, if any, in accordance with that evaluation within the prior three years. 23 The law does not prescribe any particular format for this self-evaluation, but does require that it be reasonable in detail and scope in light of the size of the employer and states that it may be consistent with standard templates or forms issued by the attorney general. 24 The Attorney General has in turn promulgated a Pay Calculation Tool and made it available for free download. 25 The tool cautions that it is intended as a starting point for employers who choose to conduct a self-evaluation to determine if they are paying employees equally for comparable work and will not tell employers definitively whether they are in compliance with the law. 26 The instructions further underscore that the law requires a case-by-case determination and the scope and detail of the analysis required will vary significantly depending on the size, make-up, and resources of each employer. 27 Employers in Massachusetts will thus want to think carefully about whether employing such a simple tool makes sense 21 Id. at Id. 23 MASS. GEN. LAWS ANN. ch. 149, 105A. Oregon has enacted a more limited safe harbor (effective January 1, 2019) that allows an employer to move to bar compensatory or punitive damages upon proof that it completed an equal-pay analysis of the employer s pay practices in good faith that was reasonable in detail and scope and related to the plaintiff s protected class, and that it has since [e]liminated the wage differentials for the plaintiff and has made reasonable and substantial progress toward eliminating wage differentials for the protected class asserted by the plaintiff. OR. REV. STAT. ANN Relatedly, Nevada has implemented a system to certify vendors in the state who pay their employees equal pay for equal work without regard to gender, and will permit companies to self-certify in accordance with state regulation NEV. LAWS CH (A.B. 106). 24 MASS. GEN. LAWS ANN. ch. 149, 105A 25 Commonwealth of Massachusetts, Office of the Att y General, AGO Pay Calculation Tool, available at 26 Commonwealth of Massachusetts, Office of the Att y General, Pay Calculation Tool Instructions (Mar. 1, 2018), available at 27 Id

8 in the context of their workforce, and if so what antecedent investigation might be needed to determine what employees would be properly considered together in a single analysis using the tool. Finally, as in Maryland, the Massachusetts law creates a special commission to aid in its enforcement. 28 By January 1, 2019, the commission is tasked with submitting a report to the legislature that will evaluate the factors, causes and impact of pay disparity based on, among other protected statuses, gender identity, sexual orientation, and disability status. 29 While the bill does not describe a role for the commission beyond this initial reporting duty, the focus on pay disparity with respect to other diverse groups signals a possible new frontier in equal pay initiatives. III. Compliance Issues for Multi-Jurisdictional Employers While all of these recent enactments share a focus on addressing pay equity issues, differences among them may present compliance challenges for national employers, particularly those that seek to have uniform compensation practices across the company. In particular, differences in who various state laws consider pay comparators may prove challenging for interstate employers. Employers attempting to conduct a company-wide pay audit may find it difficult to determine how to group employees for purposes of analysis, where that analysis should ideally mirror the relevant legal standards but those standards diverge across state lines. This determination may be particularly complicated if as highlighted above the text of certain state laws may appear identical, but one may need to consult court decisions, legislative history, or other interpretive materials to determine what comparators the law was intended to capture. Employers will also need to consider the interaction of their state law compliance obligations with their federal nondiscrimination obligations under Title VII. One commentator has already noted the potential for tension between the requirements of these new state laws and federal law where comparator standards diverge, asking: [D]o employers violate federal law by raising the pay of either men or women because of their gender, to comply with state law, when no federal law violation requires such remediation? Indeed, under such circumstances, do state-mandated gender-conscious pay adjustments violate Title VII? 30 These various state laws should not be read to impose inconsistent obligations on employers, within or across jurisdictions. Given the evolving state of the law, however, employers are well-advised to carefully consider their proactive pay equity monitoring and defense of any pay equity claims in the broader context of the patchwork of laws and obligations that they now need to navigate MASS. LEGIS. SERV. CH. 177 (S.B. 2119) (West 2016). 29 Id. 30 Allan G. King, Does Title VII Preempt State Fair Pay Laws?, 32 A.B.A. J. LAB. & EMP. L. 65, 65 (2016)