Posted by Emily Leinbach on March 25th, 2019
Originally published on LinkedIn by Dave Melville (CEO & Founder of The Bowdoin Group).
Last week, I had the distinct pleasure of being part of a fireside chat as part of Goodwin’s Jumpstart Bio breakfast series. The purpose of the series is to equip BioPharma professionals to anticipate, prepare for, and respond to legal issues on the horizon for the industry.
And that it did.
Hosted at Goodwin’s office on Northern Avenue in Boston, the view boasts 360-degree views of the sparkling harbor and the bustle of the Seaport—a fitting location for an enlightening conversation.
BioPharma leaders and HR executives had gathered to discuss hiring and pay equity laws and how they’re affecting BioPharma companies. Jennifer Fay, my co-panelist, Partner at Goodwin, expert on all things gender pay equity-related, (and one of the most impressive people I know), helped unpack the updated MEPA (Massachusetts Equal Pay Act) to provide insight on what it means for all of us in the BioPharma community.
The First Impression of MEPA from a Labor and Employment Lawyer
To kick things off, I asked Jennifer to tell us how she really felt about the amended MEPA law when it was enacted in 2016. Her response: “It seemed like a good idea from a policy perspective. Who would disagree with equal pay for women?”
Her hang up was that there seemed to be a number of ambiguities in the new law, she didn’t know how to interpret them —she was looking for more guidance from the Attorney General on how it actually worked from a practical standpoint. She needed answers to questions like what does “equal pay” actually mean? When is work “comparable”? And, perhaps most importantly, how does the new affirmative defense work?
That guidance finally came out many months later in the form of a 30-something page document (which Jennifer referred to at least fifteen times throughout the panel, flipping her dog-eared copy directly to exact topics when prompted, illustrating just how well she knew it). After spending that first weekend reading through the document, her initial response was, “I have no idea how my clients are going to do this.”
That early shock has since worn off as she has spent much of the last year working with clients to evaluate gender pay equity and ensure they’re complying with the law. Now, she recognizes it for what it is: the most progressive gender pay legislation of all the states and the most unique in that it allows for the self-evaluation method for affirmative defense (in laymen’s terms, this means that a company can conduct a self-evaluation of its pay practices which can serve as the legal defense for a claim, although they have to conduct one at least every three years).
So How Does MEPA Actually Work?
We talked through two examples:
Example 1: A woman is hired into a group with four men who all have different salaries. They all do comparable work. If everything else is equal, the woman must be paid at the same level as the highest paid man unless there is proper justification why the men should be paid more (more on justification soon). Here’s the kicker: all of the men must then be bumped up to that level as well if the woman is paid at the higher rate of pay —it is gender pay equity, after all.
Example 2: Picture Mike—he’s a biostatistician. He’s been with the company for a few years, but he’s an average performer who would have been replaced had his skill set been easier to find. He makes $190,000. Now picture Jasmine, a star candidate that the company is planning to hire who has it all, including excellent references. She asked to be paid $220,000. The company either needs to bring Mike up to $220,000 or prove that Jasmine has something that Mike doesn’t.
I really wanted to dig into this, so Jennifer described MEPA’s six classes of justification which provided the basis for one person of a different gender to be paid more or less than another:
- a seniority system
- a merit system
- a system that measures earnings by quantity or quality (e.g. sales commissions)
- a geographic location
- education, training, or experience that are related to a particular job
- required travel
The only thing differentiating Mike and Jasmine from each other is #5—education, training, or experience related to that particular job—so the company must highlight exactly why Jasmine’s makes her $30K more valuable than Mike. After MEPA, you can no longer use market data to describe why one person gets paid more than another (e.g. “when he/she was hired, the value of that skill set was X, now it’s Y.”)
One thing we see (perhaps too often) in BioPharma at the end of the hiring process is a candidate realizing that he/she is vested in equity at their prior company. In order to make the leap to the new company, they want a sign-on bonus to make things equal. Jennifer commented that each category of compensation (commission, bonus, sign-on bonus, salary, stock options) is considered separately, so justification must be provided for each category.
How Salary Negotiation Has Changed
The revised MEPA makes it illegal to ask a person what their current salary is…GASP.
When we learned this, I’ll be honest…we freaked out a little. As an executive search firm, forming the basis of a salary decision for our clients just got a lot harder.
What we’ve found since the MEPA amendment became effective is that about 60-70% of candidates volunteer that information. They know their market value and want to share it so that they’re not caught off guard at the end of the process. Under MEPA, if someone volunteers that information, you can confirm that with their former employer. Also (and this is a lesser-known fact), once you’ve made a formal offer with compensation, you can ask about current salary, although at that point, it’s kind of a moot point—your skin is already in the game.
We typically ask candidates, “What are your salary expectations?” which is a good way to start the conversation. We just can’t ferret out current salary information by saying something like, “$115-120K—sound about right?” Salary negotiations are more of a dance than they were pre-MEPA, but we’ve found that practice makes perfect.
What Can You Do to Protect Your Company in Light of MEPA?
MEPA says that a good faith self-evaluation that is reasonable in detail and scope can stand up in court. To protect yourself, you’ll want to conduct your own evaluation (consult a legal expert like Goodwin to be safe). Self-evaluations consist of four main steps:
- Conduct a comparability analysis. This requires defining what “comparable work” is at your company and who falls in each category.
- Determine if there is disparity in pay between genders. Note that MEPA doesn’t care if two men or two women who do comparable work are paid differently, just men compared to woman.
- Assess if disparities can be justified by one of the so called “six factors”.
- If there are gender-based pay disparities that cannot be justified, make adjustments to address those disparities. Keep in mind this doesn’t need to happen overnight.
At the end of the day, complying with MEPA is not only a way to protect against lawsuits, it’s also doing the right thing. But because the amended law is still new, companies are just starting to figure out what it means for them. Our advice: stop asking about current salary, consider how to evaluate current pay practices, and consult a hiring or legal partner to fill in any knowledge gaps.
To learn more about gender pay equity, check out Bowdoin and Goodwin’s report called “What BioPharma Leaders Need to Know about Recent Employment Law Developments.” It goes into much more depth on these issues and others, including noncompetes, non-solicitations, how the #metoo movement has changed hiring, leave laws, and more. Access it here.