A big change is coming for employers in the Ocean State. On January 1, 2023, Rhode Island’s new pay equity legislation (the “Act”) goes into effect. Last year, Rhode Island joined a legion of states to enact sweeping pay equity legislation when Governor Daniel J. McKee signed the pay equity bill into law. The Act seeks to combat wage discrimination by strengthening and closing gaps in existing wage discrimination laws. With only a few months remaining until the Act goes into effect, here is what Rhode Island employers need to know.
What is Pay Equity?
Pay equity is a term used to describe the practice of compensating employees the same way for the same work, regardless of their status as a member of a protected class.
What are My Obligations as An Employer?
The Act will prohibit all Rhode Island employers from paying an employee at a wage less than the wage rate paid to employees of another race, color, religion, sex, sexual orientation, gender identity/expression, disability, age (40 or over), or country of ancestral origin (“Protected Class”) for performing comparable work.
- “Wages” is defined broadly to include nearly all types of compensation, exclusive of tips and overtime pay.
- “Comparable work” is defined as work that, “as a whole,” requires “substantially similar skill, effort, and responsibility, and is performed under similar working conditions.” Importantly, “minor differences in skill, effort, responsibility” will not prevent two jobs from being considered comparable.
Notably, the Act does permit wage differentials, in limited circumstances, where the employer can demonstrate that the pay disparity is reasonably explained by, or the employer reasonably relied on, one of the following:
- A seniority system (provided, however, that time spent on leave due to a pregnancy-related condition or parental, family or medical leave do not reduce seniority)
- A merit system
- A system that measures earning by quantity or quality of production
- Geographic location when the locations correspond with different costs of living
- Reasonable shift differentials
- Education, training, or experience (to the extent such factors are job-related and consistent with a business necessity)
- Work-related travel, if travel is regular and a business necessity
- Any other bonafide job-related factor, consistent with business necessity, other than membership in a protected class
Additional constraints on an employer’s ability to justify a wage disparity include the following:
- Employers may not reduce any of its employees’ wages to comply with the Act
- Employees may not agree to be paid less than the wage rate to which they are entitled under the Act
- Employee wage history cannot be used to justify an unlawful wage differential
May We Consider an Applicant’s Pay History?
The Act prohibits employers from using a job applicant’s wage history information prior to an offer of employment. Specifically, the Act prohibits:
- Employer inquiries into an applicant’s wage history
- Employer reliance on the wage history of an applicant (1) when deciding whether to consider the applicant for employment or (2) in determining the wages the applicant will be paid upon hire
- Employers requiring that an applicant’s prior wages satisfy a minimum or maximum criteria as a condition of employment
Notably, the Act does allow employers to consider an applicant’s wage history after an initial offer of employment is made for the purposes of increasing the amount of wages initially offered to the applicant. In such instances, the applicant must have voluntarily provided their wage history without prompting from the employer.
Do We Have to Disclose Pay Ranges for our Positions?
The Act also imposes a new obligation on employers to, upon an applicant’s request, provide the “wage range” of a position for which the applicant is applying. Additionally, upon the request of a current employee, employers must provide the wage range for the employee’s position.
Importantly, even in the absence of any wage range requests, employers must provide current employees with the wage range for their position both (1) at the time of hire and (2) when the employee moves into a new position.
May our Employees Discuss their Pay?
The Act also calls for wage transparency in the workplace, making it unlawful for employers to prohibit employees from inquiring about, discussing, or disclosing their wages with other employees. The Act further prohibits employers from (1) retaliating against employees who engage in such activity or (2) requiring employees to enter into any agreement limiting their right to disclose or discuss their wages. [NOTE: Employer attempts to prohibit this activity were already unlawful prior to the enactment of the new pay equity law. The Act serves to make these prohibitions on employer attempts to suppress such activity by or among employees expressly clear.]
What are the Penalties for Non-Compliance?
The penalties for non-compliance with the Act are severe. Employers that violate the equal pay provisions may be liable for unpaid wages, compensatory damages, special damages of up to $10,000, liquidated damages up to twice the amount of unpaid wages and/or benefits, equitable relief (such as reinstatement of the employee’s position, fringe benefits, and seniority rights), punitive damages if the employer acted with malice and reckless indifference, reasonable attorneys’ fees and costs.
If the RIDLT initiates an investigation and finds a pay equity violation, it may impose civil penalties between $1,000 and $5,000 depending on the employer’s prior violations of the Act, the size of the employer’s business, the good faith of the employer, the gravity of the violation, and whether the violation was an innocent mistake or willful. Notably, the Act does provide a grace period such that no civil penalties will be assessed by RIDLT from January 1, 2023 to December 31, 2024.
How Can I Avoid Liability?
Through June 30, 2026, employers will have an affirmative defense to all liability for any alleged unlawful wage practices if they can show they: (1) conducted a good faith “self-evaluation” of their pay practices (i.e., wage audit) within the two years preceding the commencement of a pay equity lawsuit; and (2) eliminated all wage disparities revealed by the self-evaluation by compensating all employees for any unpaid wages owed under the Act, within 90 days of completion of the self-evaluation. While employers may use their own self-evaluation templates, the Rhode Island Department of Labor and Training (“RIDLT”) has issued guidance and a pay equity spreadsheet for employers conducting self-evaluations.