On January 1, 2023, the Rhode Island Pay Equity Act (“Act”) went into effect. The Act significantly impacts multiple phases of the employment life cycle. Namely, the Act prohibits wage discrimination based upon membership in a protected class, limits an employer’s use of an employee’s/applicant’s wage history, provides employees with access to certain wage information, and requires equal pay for comparable work. These questions and answers address a few of the legal issues raised by the Act.
Does the Act Apply to My Business?
The Act broadly defines “employer” and practically every employer with employees working in Rhode Island must comply. Specifically, the Act applies to all Rhode Island employers, as well as employers that are not incorporated in Rhode Island or do not maintain a principal place of business in Rhode Island but that have projects or satellite offices in Rhode Island. If an employer employs any person who works in Rhode Island, then the new law will almost certainly apply.
Does the Act Apply to All Employees?
The Act applies to all employees, regardless of the number of hours that they work, the amount of their wages, or whether they are eligible for overtime. The law does not apply to independent contractors or subcontractors.
Employers who subcontract work in Rhode Island include express language in subcontract agreements providing that their company does not employ the subcontractors and that those subcontractors have no legal rights under the Act against their company. Employers may also consider amending indemnification provisions with subcontractors to ensure that subcontractors defend and indemnify their company if a subcontractor-employee seeks to hold their company liable for a violation of the Act.
How Does the Act Affect Employer Requests for Wage History During the Application Process?
During the application process (before a compensation offer is made), employers are prohibited from:
- relying on the wage history of an applicant when deciding whether to hire that applicant;
- setting a minimum or maximum prior wage or salary threshold for an applicant as a condition of hire;
- relying upon an applicant’s wage history when determining that applicant’s wages to be paid upon hire;
- seeking the wage history of an applicant;
- retaliating against any applicant or employee who seeks to assert their rights under the Act; AND
- refusing to hire, promote, or employ an applicant for failure to provide wage history.
Employment policies concerning the application process must be updated to comply with the Act. Further, employers should train human resources employees, hiring managers, supervisors, and all other employees involved in the hiring process about these prohibitions and their general obligations pursuant to the Act. Employee participation in these trainings should be documented and maintained in the employee’s personnel record.
Can Employers Inquire About Wage History after Making an Initial Compensation Offer to an Applicant?
After the initial compensation offer is made to an applicant, employers may engage in limited discussions with an applicant concerning wage history. Specifically, an employer may:
- rely on the applicant’s wage history to support a higher wage than that offered by the employer if the applicant voluntarily provides their own wage history;
- seek to confirm the applicant’s wage history to support a higher wage offered by the employer if the applicant voluntarily provides their own wage history;
- consider wage history of an applicant for a position when that employee currently works for the employer;
- verify information voluntarily provided by the applicant concerning the applicant’s unvested equity or deferred compensation that would be forfeited by a change in employer; and
- request a background check for an applicant that does not affirmatively seek wage history.
If an Employer intends to make inquiries about an applicant’s wage history after making an initial compensation offer, the employer should carefully consider the scope of information requested and be prepared to present documentation that the information received did not impact the ultimate hiring decision. Employers are prohibited from affirmatively requesting wage history information after the initial compensation offer is made.
What Is Required of Employers If an Applicant Requests the Wage Range for a Position?
The Act permits applicants to request the wage range for the position to which they are applying. If a request is made, the employer must comply with the request and must provide at least the minimum and maximum wages for the range. Although not required by the law, employers should provide the wage range before discussing compensation with the applicant. Employers will need to update policies and training so that those involved with the hiring process understand their obligations when these requests are made. The company’s policy must be uniformly followed to mitigate potential disparate treatment claims.
This requirement remains in place after an applicant becomes an employee. Employers are required to provide any current employee with the wage range for their position upon request. This law does not require employers to voluntarily post or share their wage ranges.
Can Employers Prohibit Employees from Discussing Wages?
Under the Act, employers may not prohibit employees from inquiring about, discussing, or disclosing their wages or those of another employee.
This calls into question whether employers may discipline employees for disclosing confidential personnel information concerning wages when an employee did not authorize the disclosure of such information. This portion of the Act will likely create litigation and require further amendment.
Does the Act Change How Employers Compensate Employees?
The Act codifies what should already be general practice: employers are prohibited from paying lesser wages to any employee who is performing comparable work because of an employee’s “race or color, religion, sex, sexual orientation, gender identity or expression, disability, age [40+], or country of ancestral origin.” For work to be “comparable” and to fall within the Act, that work must require substantially similar skill, effort, and responsibility and must be performed under similar working conditions. In other words, the law does not require equal pay for unequal work. However, employers must be cautious when paying “like employees” different wages.
A “comparable work” analysis will be fact-specific and require an analysis of the comparable jobs as a whole. Employers should carefully review job descriptions and identify whether there are pay discrepancies concerning “comparable work” that may violate the Act. Moving forward, employers should regularly update job descriptions as the positions evolve – always keeping in mind that an employee’s wages for similar work often must be equal (subject to the exceptions in the next question).
Can Employers Ever Pay Employees Who Perform “Comparable Work” Differently?
Yes – subject to a fact-based analysis. For wage differentials related to “comparable work” to be lawful, employers have the burden of establishing that the wage difference is based upon:
- a seniority system (provided pregnancy-related, parental, family, or medical leave do not reduce seniority);
- a merit system
- a system that measures earnings by quantity or quality of production;
- geographic location (assuming the locations have different costs of living and both locations are not in Rhode Island)
- reasonable shift differential;
- education, training, or experience that are job-related necessary for the business;
- work-related travel if that travel is necessary for business; or
- a bona-fide characteristic that is not a protected characteristic (see previous question).
Employers should develop clear, written policies notifying employees of these factors. Further, any seniority system, merit system, or system measuring earnings by quantity or quality of production should be in writing, provided to employees as part of a handbook, and reviewed and revised on a regular basis.
Does the Act Require Employers to Place Employees on Notice of the Law?
Notices of employees’ rights under the Act must be posted in a conspicuous place at the workplace. The Pay Equity Act notice may be found here (under “DLT Required Posters” and then “Individual Posters”). Employers should also send this notice to remote employees who may be impacted by the Act via email. Employers should also have employees acknowledge receipt of the notice, and those acknowledgments should be maintained in the employee’s personnel file.
What Damages Might Employers Incur for Violating the Pay Equity Act?
Employees may file a lawsuit on behalf of themselves or on behalf of a class of similarly situated employees. The RI Department of Labor and Training (DLT) may also investigate an employer if it receives an employee complaint. The available damages vary based upon the specific cause of action.
- Employee and Former Employees Alleging Wage Discrimination Based Upon Protected Class
Employees who prevail on claims of wage discrimination, retaliation, or employer’s failure to provide adequate notice of employee rights may recover lost wages, compensatory damages, liquidated damages up to two times the amount of unpaid wages, equitable relief (e.g., reinstatement), and reasonable attorneys’ fees. This provision also applies to former employees. There is a two-year statute of limitations for these claims (three years for willful employer misconduct). Prior to filing a complaint for wage discrimination, employees must provide employers with 45 days’ advanced notice.
- Employee Claims Related to Wage History and Wage Range Violations
If an employer improperly relies upon wage history information or fails to provide adequate wage range information, those employers are subject to compensatory damages, punitive damages (not to exceed $10,000), and the employee’s attorneys’ fees and costs. Last, employers may be subject to fines issued by the DLT ranging from $1,000 to $5,000. There is a two-year statute of limitations for these claims (three years for willful employer misconduct). These claims do not apply to former employees.
What Defenses Are Available to Employers?
The Act is not a strict liability statute. Employers have defenses against claims that they violated the Act, but they have the burden of proof to prove that any wage differences for comparable work resulted from the permissible criteria set forth in the Act.
Further, the Act includes an affirmative defense that is valid between January 1, 2023 and June 30, 2026. For the defense to apply, employers must satisfy two conditions:
- Conduct a “good faith self-evaluation” of the employer’s pay practices covering the two-year period prior to the commencement of any suit alleging violation of the Pay Equity Act; AND
- Demonstrate that any unlawful wage differentials found during the self-evaluation have been eliminated.
The RI DLT offers a self-evaluation template. Employers are also permitted to design their own self-evaluation process. The determination as to whether the “self-evaluation” was conducted in good faith will involve a fact-intensive analysis. Further, the act of conducting a “self-evaluation” alone is insufficient for the affirmative defense to be applied successfully.
Will Employers Be Penalized for Failing to Conduct a “Self-Evaluation”?
An employer’s decision not to perform a “self-evaluation” does not subject the employer to any negative inferences under the law. The employer simply will not be able to raise the affirmative defense if they do not perform a “self-evaluation.”
What Next Steps Should Employers Take?
If employers have not already conducted a self-evaluation or have not recently reviewed their job descriptions and wage ranges for comparable work, then employers should take those actions as soon as practicable. The Act significantly changes employer wage policies and procedures; therefore, employers should take the time now to revise policies, train appropriate staff, and place employees on notice of their rights. Failure to comply with the new law subjects employers to significant damages that could be mitigated by allocating time and resources to developing and implementing appropriate risk prevention measures.
Employers with questions should consult with a Kenney & Sams employment attorney.
This alert is for informational purposes only and may be considered advertising. It does not constitute the rendering of legal, tax or professional advice or services. You should seek specific detailed legal advice prior to taking any definitive actions.