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  >  Business Law   >  Part III: Permissible Pay Disparities

Part III: Permissible Pay Disparities

On July 1, 2018,  An Act to Establish Pay Equity (the “Act”) goes into effect.   The Act prohibits discrimination in payment of wages on the basis of gender.  In our second article about the Act we examined the complicated definition of “comparable work”.  Below is the third article in our series concerning the Act, which sets out the limited circumstances in which a wage disparity may be allowed.
In general, the Act bars situations where employees of different genders are paid unequally for performing comparable work.  However, the Act also includes six (6) permissible circumstances when an employer  may pay different wages to employees who perform comparable work:

  • The employer has an established system that rewards seniority with the employer.  Notably, any such system cannot reduce seniority credit for employee time spent on leave due to a pregnancy-related condition and for time away from work for protected parental, family and medical leave.


  • A merit system which provides for variations in pay based upon employee performance as measured through legitimate, job-related criteria. For example, an employer may have a written performance rating plan or policy that quantifies employee performance into account when determining employee wages for the subsequent year.


  • A system which measures earnings by quantity or quality of production, sales, or revenue. For example, payment for piece work, hourly pay for hours worked, or commission-based pay.


  • Payment which varies relating to the geographic location in which a job is performed. This factor takes into account potential variations in cost of living where work is performed in different areas and variations in the labor market.


  • Education, training or experience that are reasonably related to the job in question. An employee may be paid more if, at the time wages are set, they possess education, training, or experience that would help them perform the work in a more efficient manner than other employees.


  • Travel, if the travel is a regular and necessary condition of the particular job.

Employers must note that any factor which is not specifically set forth in the Act (even good-faith reasons which are not related to gender) will not prevent employer liability.  This is a significant difference from other prior pay equality laws and anti-discrimination laws, which often include a general “catch-all” provision allowing pay disparity to exist for any non-gender related factor.
Please read the fourth installment in our series, titled Part IV: Other Important Provisions of the Act.  If you have questions about permissible pay disparities, please contact Attorney Michael P. Doherty, Andrew M. Kepple or one of our other employment attorneys at 508 541-3000.