In May 2016, Governor Lawrence J. Hogan signed into law House Bill 1003, which goes into effect on October 1, 2016. Many are referring to House Bill 1003 as the “new” equal pay law, but it is really an expansion of the current Maryland equal pay laws that have been in effect for almost 25 years. This Alert highlights significant changes in the law.

Gender Identity

While “sex” is already a protected characteristic under current law, House Bill 1003 adds “gender identity” as another protected characteristic. Gender identity “means the gender-related identity, appearance, expression, or behavior of a person, regardless of the person’s assigned sex at birth ... .” This addition follows the increasing national trend toward protecting transgender and similarly situated employees in the workplace.

Prohibited Activities

House Bill 1003 also expands what actions and inactions by an employer constitute discrimination. In addition to the current prohibition on “paying a wage to employees of one sex (or gender identity) at a rate less than the rate paid to employees of another sex (or gender identity) if both employees work in the same establishment and perform work of comparable character or work on the same operation, in the same business, or of the same type,” an employer now may not “provide less favorable employment opportunities based on sex or gender identity.” Less favorable employment opportunities include assigning an employee to a less favorable career track or failing to provide an employee with information regarding promotions or advancement, among other things. The new bill also provides that “an employee shall be deemed to work at the same establishment as another employee if the employees work for the same employer at workplaces located in the same county of the state.”

New Exceptions

Maryland’s current “Equal Pay for Equal Work” laws provide certain exceptions for legitimate variations in wages, including:

  1. a seniority system that does not discriminate on the basis of sex;
  2. a merit increase system that does not discriminate on the basis of sex;
  3. jobs that require different abilities or skills;
  4. jobs that require the regular performance of different duties or services; and
  5. work that is performed on different shifts or at different times of day.

House Bill 1003 adds that the previous five categories may not be based sex or gender identity, and also provides two new exceptions: (1) a system that measures performance based on a quality or quantity of production; and (2) a bona fide factor other than sex or gender identity, including education, training or experience, in which the factor: (i) is not based on or derived from a gender-based differential in compensation; (ii) is job related with respect to the position and consistent with a business necessity; and (iii) accounts for the entire differential.

Pay Transparency

Pay transparency provisions represent another significant addition to House Bill 1003. Consistent with the position taken by the National Labor Relations Board ("NLRB"), a Maryland employer may not prohibit employees from discussing their wages with other employees or inquiring about the basis of their wages. An employer also may not retaliate against any employee for the aforementioned reasons. However, an employer may establish reasonable workday limitations on the time, place and manner for such discussion or inquiries. The pay transparency provisions do not apply to an employee whose job duties require access to wage information, and who learns the wage information through that channel. An employer can still prohibit disclosure of any proprietary or trade secret information otherwise subject to legal protection.

House Bill 1004: Equal Pay Commission

Along with the new equal pay provisions, Governor Hogan signed a separate but related bill, House Bill 1004, which establishes an Equal Pay Commission (“the Commission”) that comprises the Secretary of Labor, the Executive Director of the Commission on Civil Rights and various community representatives. The Commission is responsible for evaluating wage disparities based on sex, gender identity or race; establishing a means for the Commissioner to collect data from Maryland employers; and developing strategies and recommendations for best practices regarding equal pay for equal work.

What This Means for Employers

From a practical perspective, Maryland employers should review employee compensation and ensure that there are legitimate reasons for any wage disparities. Employers may need to conduct internal audits or modify hiring criteria and employee advancement policies, as well.