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Appeals Court Decision Underscores Importance Of Employer Pay Equity Audits

The Massachusetts Appeals Court recently held, in Woodward v. Board of Registration in Nursing, that an employer may avail itself of an affirmative defense to a claim under the Massachusetts Equal Pay Act (“MEPA”) if the employer can show that it has recently performed a MEPA self-audit and begun taking steps to address any pay disparities between male and female employees holding comparable positions.

This ruling is significant for Massachusetts employers, as it confirms that a thorough and well-documented pay equity audit can provide an employer with a powerful shield against MEPA claims.

Statutory Framework

MEPA provides a civil cause of action for employees who claim to have experienced pay disparities based on sex. In 2016, MEPA was amended to require that male and female employees holding “comparable” positions be paid equally, unless an employer can demonstrate that any pay differentials result from one of several specific criteria, such as experience, geography, or the effort required by a job.

The 2016 amendments also created an affirmative defense for employers that conduct self-evaluations to identify potential pay disparities among male and female employees who perform comparable work. An employer that wishes to take advantage of this defense must show (1) that it carried out a good-faith self-audit within three years prior to the commencement of the lawsuit, and (2) that the employer has made “reasonable progress” towards eliminating any unlawful pay disparities uncovered by the evaluation.

Case Background

In 2015, the Massachusetts Department of Public Health’s Board of Registration in Nursing (“BRN”) hired Laureen Woodward as a Compliance Officer III. The Commonwealth’s Human Resources Division credited Woodward with ten years of previous comparable experience and started her salary at Grade 13, Step 6, totaling $65,241.28. Several years later, BRN hired two male candidates into the same position and placed them into higher steps: Step 12 at $82,763.46 and Step 14 at $87,829.82.

In 2019, BRN conducted an agency-wide MEPA audit to identify any gender-based pay disparities. This self-evaluation resulted in the identification of seven employees – of which Woodward was not one – with potentially impermissible disparities. BRN then increased those seven employees’ salaries.

In 2020, Woodward filed suit against BRN in the Superior Court, alleging violations of MEPA and other causes of action. After discovery, BRN moved for summary judgment, invoking MEPA’s affirmative self-evaluation defense. The Superior Court granted summary judgment, and Woodward appealed.

Appeals Court’s Decision

Affirming the lower court’s decision, the Appeals Court held that BRN had successfully availed itself of the affirmative defense under MEPA. In doing so, the Court rejected three of Woodward’s arguments opposing summary judgment: (1) the self-evaluation was untimely; (2) the audit was not conducted in good faith; and (3) post-audit, there was no reasonable progress toward eliminating pay disparities.

Instead, the documentary evidence provided by BRN carried the day, including email correspondence, spreadsheets, and Human Resources Division guidelines illustrating that the audit was both timely and carried out in good faith. In its analysis, the Court referenced guidance from the Attorney General’s office clarifying that the “good faith” standard requires an employer to show that its self-audit was a “genuine attempt to identify any unlawful pay disparities among employees performing comparable work,” and not a sham intended to achieve predetermined results or justify known disparities.

The Appeals Court likewise found abundant evidence of BRN’s “reasonable progress” towards eliminating pay disparities, emphasizing that the agency had identified seven impermissible wage differentials and subsequently adjusted those individuals’ salaries upward.

Recommendations For Employers

In light of the Woodward decision, there are a number of important steps that we recommend Massachusetts employers take:
 

• Conduct regular pay equity audits. By conducting a good-faith pay equity audit at least every three years, an employer can ensure that this affirmative defense is continuously available to it. As the Appeals Court noted, a self-audit “may be of the employer’s own design, so long as it is reasonable in detail and scope in light of the size of the employer, or may be consistent with standard templates or forms issued by the Attorney General.” As a best practice, an employer should engage employment counsel and conduct the self-evaluation under the auspices of the attorney-client privilege, in order to keep its findings confidential to the greatest extent practicable.

• Thoroughly document pay equity audits. As illustrated by the emails, spreadsheets, and other documentation BRN was able to point to, an appropriate paper trail can be key to a successful defense of a MEPA claim.

• Implement processes to address pay disparities. As soon as reasonably possible, an employer should begin addressing any impermissible pay disparities found in its self-evaluation. Notably, the MEPA affirmative defense does not require that the employer demonstrate that it has eliminated all impermissible pay differentials between male and female employees. Rather, the employer simply must show that it has made “reasonable progress” in redressing any disparities.

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If you have any questions about the Appeals Court’s Woodward decision, or if you would like our assistance with carrying out a MEPA self-audit, please feel free to contact one of our experienced employment attorneys.