Maryland Passes New Pay Equity Law

Maryland recently passed into law sweeping revisions to its existing equal pay law. The new law, signed by Governor Hogan on May 19, 2016, will take effect on October 1, 2016. With the passage of the Equal Pay for Equal Work Act, Maryland joins California and New York in expanding pay equity protections. The act significantly amend the current statute, Md. Code, Labor and Employment, §3-301, et seq. and expands both the scope of the law and its remedies.

Among the most notable changes, the act:

• expands protections against pay differentials to include those based on gender identity, as well as gender;
• expands the definition of “same establishment” to facilities in the same county;
  • As a consequence an employee will now be able to assert a pay differential between employees working at different locations within the same county, rather than at the same location.
• expands the prohibition against unequal pay for work of comparable character to also prohibit an employer from “providing less favorable employment opportunities.”
  • Under the new law, “providing less favorable employment opportunities” includes assigning or directing an employee into a less favorable career track (if career tracks are offered); failing to provide information about promotions or advancement, if any, in the full range of career tracks offered by the employer; or otherwise limiting or depriving an employee of employment opportunities that would otherwise be available but for the employee’s sex or gender identity;
• adds a new exception that allows differentials based on employer systems that measure performance based on quality or quantity of production;
• adds another new exception that allows for differentials in compensation based on “a bona fide factor other than sex or gender identity, including education, training, or experience,” but only if that factor:
  • is not based on a gender-based differential in compensation;
  • is job-related with respect to the position and consistent with a business necessity; and
  • accounts for the entire pay differential; and
• expressly provides that an employee can establish a violation of the act if he or she shows that the employer’s reliance on one or more statutory exceptions is a pretext for discrimination on the basis of sex or gender identity.

The new Maryland law also follows recent national trends in expanding the right of employees to share information regarding their wages. The amended statute includes a new provision that makes it unlawful for an employer to prohibit an employee from: (i) inquiring about, discussing, or disclosing his or her wages or the wages of another employee; or (ii) “requesting that the employer provide a reason why the employee’s wages are a condition of employment” (although the statutory language is unclear, it appears that this provision in intended to protect employees who ask their employer to justify the reasons for their wage rate). Further, the new statute precludes employers from requiring an employee to sign any document that purportedly denies the employee the right to disclose or discuss his or her wages.

The act further prohibits employers from taking any “adverse action” against an employee for:

• inquiring about another employee’s wages;
• disclosing his or her own wages, or discussing another employee’s wages if the other employee has voluntarily disclosed that information;;
• asking the employer for a reason for the employee’s wages; or
• encouraging or aiding another employee’s exercise of rights under the new law.

Employers, however, may establish written policies—which they must distribute to all employees—that impose reasonable workday rules limiting the time, place, and manner in which employees may discuss or inquire about wages. An employer may now invoke an employee’s failure to adhere to a reasonable limitation as an affirmative defense in an action brought by the employee.

The act also expands the available remedies for an equal pay violation to include injunctive relief. With respect to violations of the new the disclosure provisions, the act provides for injunctive relief, as well as both actual damages and liquidated damages in the same amount. The act also allows employees to recover reasonable attorneys’ fees and costs for violations of the new disclosure provisions.

Significantly, the amended statute extends the statute of limitations to three years after an employee receives his or her final paycheck upon discharge. Although the act is vaguely worded, this change appears significant as it potentially extends the limitation period for years or even decades after an alleged violation. For example, an employee who discovered she was subject to a gender based pay differential during her employment could choose not to assert claims until many years later, after her employment is terminated.

Maryland employers have a few months—until October 1—before the new law becomes effective, but they can take action now—before the government or litigants do so. Here are a couple of practical tips to consider:

• Employers may want to conduct internal reviews of their compensation processes. Note that if these reviews are initiated by counsel, they generally would be attorney-client privileged (if structured appropriately).
• The review may include the following:
  • a review of the entire compensation processes, including:
    • examining the employer’s process for making compensation decisions
    • how the employer documents compensation decisions
    • how the employer measures performance and how performance impacts compensation
    • examining the employer’s pay policies
    • understanding the factors that drive compensation decisions
• engaging a statistician or labor economist to conduct an analysis of the employer’s compensation data, which would include:
  • identification of potential pay disparities within appropriate job classifications
  • identification of justifications for any pay disparities
  • understanding the basis for any disparities and recognizing that not all pay disparities are gender based
• addressing identified pay disparities as appropriate.

Mark Burak is a member of Ogletree Deakins’ Pay Equity Advice Group.