HR Legalist

New Jersey Employers Should Prepare for New Equal Pay Law Effective July 2018

Earlier this year, New Jersey Governor Phil Murphy passed  landmark equal pay legislation, which will take effect on July 1, 2018 and impact employers statewide.  The Diane B. Allen Equal Pay Act  (Act), expands employee rights under the New Jersey Law Against Discrimination (LAD), and prohibits employers from paying an employee who is a member of any protected class a lower rate of compensation or benefits than an employee who is not protected and who performs “substantially similar work.”  Unlike some equal pay laws that focus on gender, the Act applies to employees of all protected categories under state law, including, but not limited to: gender, race, national origin, ancestry, age, sexual orientation, military status, disability, and marital status.  The law does not specifically define “substantially similar work”; however, the statute states that it this term will be viewed in light of the employees’ respective skills, effort and responsibility.

To justify compensation differences between such employees, the Act places the burden of proof on the employer to show that the differences are based on a seniority system, a merit system, or that all of the following requirements are met:

• That the difference is based on one or more legitimate, bona fide factors other than the person’s membership to the protected class (i.e. training, education or experience, or the quantity or quality of production);
• That the factors are not based on and do not perpetrate a difference in compensation based on sex or any other characteristic of members of a protected class;
• That each of the factors is applied reasonably;
• That one or more of the factors account for the entire wage difference; and
• That the factors are job-related and based on a legitimate business necessity. If it can be shown that there are alternative business practices that would serve the same business purpose without causing a wage difference, the employer will not be able to satisfy this requirement.

Employers cannot reduce an employee’s compensation to comply with the Act.  In other words, employers who are not in compliance must raise the pay of lower-paid workers performing substantially similar work.  In addition, comparison of wage rates must be based on wage rates in all of the employer’s operations—not just the facility where the employee in question works.  Other significant provisions of this statute include:

• A revised definition of prohibited retaliation, which includes taking reprisals against an employee for discussing with any other employee, the employer, an attorney, or government agency, any employee’s job title, occupation category, rate of compensation (including benefits), or the gender, race, ethnicity, military status, or national origin of any employee;
• An expansion of the statute of limitations for compensation discrimination from two to six years;
• “Treble damages” will be awarded if a jury finds an employer guilty of discrimination in compensation, which means the employee will receive triple monetary damages of the employee’s pay differential (in additional to other damages available under the LAD, such as lost wages, emotional distress, and payment of reasonable attorneys’ fees to the prevailing party); and
• A provision that states that it shall be an unlawful employment practice to require employees to agree to a shorter statute of limitations or to waive any of the protections of the LAD. It remains to be seen whether this provision will be interpreted to undercut the Supreme Court’s recent ruling upholding class action arbitration waivers.

While the courts and the New Jersey Division on Civil Rights (the agency charged with enforcing the LAD) have not yet issued any opinions or guidance on exactly how these new provisions will be interpreted and enforced, it is clear that the stakes have been raised for New Jersey employers.  It is now more important than ever for employers to be prepared to defend any differences in compensation between workers performing the same duties.  HR Legalist will continue to track the interpretation and impact of this Act.  In the meantime, employers may wish to self-audit their compensation rates and benefits to ensure that they are in compliance with this statute and reduce the risk of liability.  In addition, employers should review their anti-discrimination and retaliation policies, internal reporting procedures for employees, as well as any policies governing hiring or promotions that may be impacted by the Act.   Employers who have questions about their compensation or payroll practices, or other employment practices in general, or who need assistance with self-audits or policy revisions, should contact experienced employment counsel for assistance.