New Pay Equity Legislation developments in MA and CA:

Massachusetts passed a new Pay Equity Law on August 1, 2016. It will be effective on July 1, 2018. As described in SHRM: “The existing law essentially requires a plaintiff to show ‘unequal pay for equal work,’ according to Mark Burak, an attorney with Ogletree Deakins in Boston. The standard will be considerably broadened under the new law.

‘Comparable work,’ as referred to in the new law, means ‘work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions.’ The law further provides that job titles or job descriptions alone can’t be used to determine comparability. As an illustration of the change, Burak said that a male janitor and a female hotel housekeeper may have comparable jobs under the new provisions even though the job titles and duties aren’t the same.

He noted that the law is intended to help fix the gender-based pay gap for women, but it can also apply to men who are paid less than women in comparable jobs.

The act additionally bars employers from:

 Preventing employee discussions about wages.
 Retaliating against employees for exercising their rights under the act.

In addition, the law prohibits salary history questions, and provides a defense from liability through an employer Self Audit, and establishes a commission to study the issues further.

See: “New Mass. Pay Equity Law Prohibits Salary-History Questions, Expansive legislation will broaden existing equal pay law,” by Lisa Nagele-Piazza, SHRM-SCP, J.D., SHRM, Aug 5, 2016 (Available for SHRM members only.)
Legislation: Here
See also: Massachusetts Equal Pay/Comparable Worth: What you need to know

California: Proposed legislation would limit historical salary information, and support California’s Fair Pay Act, effective January 1, 2016, which requires employers to show that any differences in pay between men and women are due to seniority, education, a merit system or other permissible factors.

See “He Earned, She Earned: California Bill Would Limit Use of Salary Information,” by June Bell, SHRM, August 29, 2016) (Available for SHRM members only.)

Legislation: here
See also: FAQs at CA.gov

The Wage and Hour Division, Department of Labor, published the Final Rule Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees on May 23, 2016 in the Federal Register. The Final Rule is effective December 1, 2016.

The DOL Summary notes:

“The Fair Labor Standards Act (FLSA or Act) guarantees a minimum wage for all hours worked during the workweek and overtime premium pay of not less than one and one-half times the employee’s regular rate of pay for hours worked over 40 in a workweek. While these protections extend to most workers, the FLSA does provide a number of exemptions.

In this Final Rule, the Department of Labor (Department) revises final regulations under the FLSA implementing the exemption from minimum wage and overtime pay for executive, administrative, professional, outside sales, and computer employees. These exemptions are frequently referred to as the ‘‘EAP’’ or ‘‘white collar’’ exemptions. To be considered exempt under part 541, employees must meet certain minimum requirements related to their primary job duties and, in most instances, must be paid on a salary basis at not less than the minimum amounts specified in the regulations.

In this Final Rule the Department updates the standard salary level and total annual compensation requirements to more effectively distinguish between overtime-eligible white collar employees and those who may be exempt, thereby making the exemption easier for employers and employees to understand and ensuring that the FLSA’s intended overtime protections are fully implemented.

The Department sets the standard salary level for exempt EAP employees at the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region. (Lawrence Associates note: The salary level was last updated in 2004 to $23,660 per year for a full-year worker.) That amount has been set to $47,476.

The Department also permits employers to satisfy up to 10 percent of the standard salary requirement with nondiscretionary bonuses, incentive payments, and commissions, provided these forms of compensation are paid at least quarterly.

The Department sets the total annual compensation requirement for an exempt Highly Compensated Employee (HCE) equal to the annualized weekly earnings of the 90th percentile of full-time salaried workers nationally. (Lawrence Associates note: The salary level was last updated in 2004 to $100,000 per year for a full-year worker.) That amount has been set to $134,004.

The Department also adds a provision to the regulations that automatically updates the standard salary level and HCE compensation requirements every three years by maintaining the earnings percentiles set in this Final Rule to prevent these thresholds from becoming outdated. Finally, the Department has not made any changes in this Final Rule to the duties tests for the EAP exemption.”

WorldatWork www.worldatwork.org and Society for Human Resources Management www.shrm.org offer a great deal of information on options for implementing this Rule, including discussions of strategy and tool kits. As always, we recommend working with your employment attorney in reviewing and implementing changes.

On June 22, 2016, the IRS and Treasury Department issued proposed rulemaking on Deferred Compensation Plans of State and Local Governments and Tax-Exempt Entities (Code section 457 457(b) and 457(f)). As reported by Integrated Health Strategies:

“These proposed regulations, which the IRS notes can be relied on immediately when making decisions on current plans, now specify in greater detail when amounts deferred under these plans are includible in income, the amounts that are includible, and the types of plans that are excluded. Before the new regulations become final, the IRS is holding a public comment period that closes September 20, and a public hearing on October 18. Thereafter, based on feedback, the IRS may or may not make further adjustments to the proposed regulations, and will then issue final regulations. The regulations could become effective as early as January 1, 2017, if final regulations are published by year-end 2016. If the IRS misses the January 1, 2017 date, the next possible effective date would not be until January 1, 2018.” See Integrated Healthcare Strategies, Alert Advisor, and webinar

Ropes & Gray notes: “The proposed regulations do not “grandfather” existing arrangements or offer a transition period to conform to the proposed or final regulations. Thus, while new arrangements generally should be designed with an eye to compliance with the proposed rules, decisions about existing arrangements will be more complex.” See “New Proposed Rules for Deferred Compensation Plans for Tax –Exempt and Governmental Employers,” Rope&Gray alert, July 11, 2016.
Plans should be reviewed for the impact of these regulations and also their interaction with Code Section 409A.
Proposed Rules are here.