On April 24, 2018, New Jersey Governor Phil Murphy, who made “equal pay for equal work” a signature campaign promise, signed into law the Diane B. Allen Equal Pay Act ( the “Equal Pay Act”).
The Equal Pay Act greatly expands the New Jersey Law Against Discrimination (NJLAD) by requiring equal pay for all employees who perform “substantially similar work.” This expansion of the law means that employers must consider an employee’s “skill, effort and responsibility,” not just their job title, in considering an employee’s work and pay and compensation. Effective July 1, 2018, employers must pay any and all of its employees who are members of a protected class the same as other employees who are not members of that class, who perform “substantially similar work.”
The Equal Pay Act will make it illegal for employers to discriminate against an employee (or potential employee) in his or her compensation, including benefits, or condition of employment because of gender, race, creed, color, national origin, nationality, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, pregnancy, gender identity or expression, disability or atypical hereditary cellular or blood trait of any individual, and liability for service in the armed forces. An individual in one of these protected classes can raise a claim simply by pointing to any employee outside that particular class who is performing “substantially similar work” and is making more.
The Equal Pay Act carves out limited exceptions for when an employer may pay a different rate of compensation to its employees performing similar work, including only if it is due to a seniority or merit-based system, or if the employer proves each of the following:
(1) the differential is based on one or more legitimate, bona fide factors other than the protected characteristics, such as training, education or experience, or the quantity or quality of production;
(2) the factors are not based on, and do not perpetuate the compensation differential based on protected characteristics;
(3) each of the factors is applied reasonably;
(4) one or more of the factors account for the entire wage differential; and
(5) the factors are job-related with respect to the position in question and based on a legitimate business necessity.
In addition to requiring equal pay for employees who perform substantially similar work, the Act:
- Prohibits retaliation against an employee for seeking legal advice regarding rights under the New Jersey Law Against Discrimination (NJLAD) or sharing information with legal counsel or a governmental entity.
- Prohibits retaliation against an employee for requesting from, discussing with, or disclosing to another current or former employee of the employer, a lawyer from whom the employee seeks legal advice, or a governmental agency, any information regarding the job title, occupational category, rate of compensation (including benefits), gender, race, ethnicity, military status or national origin of the employee (or of any other current or former employee of the employer), or conditioning employment on an agreement not to make such requests or disclosures.
- Prohibits an employer from conditioning employment on an employee’s or prospective employee’s waiver of protections under the NJLAD or consent to a shortened period within which the employee may timely bring an NJLAD claim.
- Requires public contractors to report employee compensation and hours worked to the New Jersey Department of Labor and Workforce Development, with such data categorized by employee gender, race, ethnicity and job category.
- Expands the time period for filing claims and the lookback period, exposing employers to greater liability for violations. Under the new law, an unlawful employment practice can be “continuing,” i.e. ) it can occur weekly, monthly, or each time an employer’s pay practices discriminate against an employee, and an employee can seek back pay for six years running from the most recent (as opposed to two years under current federal law). If it is determined that an employer has violated the new pay practices, treble damages, meaning three times any money damages, can be awarded.
How does New Jersey’s law differ from the Federal Law?
The Equal Pay Act also goes beyond the 2009 Federal Lilly Ledbetter Pay Act in many ways. For example, an employer can consider “substantially similar work” across all of the employer’s operations or facilities, not just the one location where the complaining employee works.
While this new Act expands protections available to employees, employers should also be aware, in addition to violating the new Equal Pay Act, discriminatory pay based on gender (or other protected characteristics) may also – and likely will – continue to violate state and federal laws prohibiting discrimination.
Next Steps for New Jersey Employers
In view of the broad application of the Act and the significant damages that could apply in the event of a violation, employers should promptly do the following to ensure compliance:
- Review and update job descriptions for each position or job title to determine which employees perform “substantially similar work” and, thus, generally must be compensated at the same rate of pay.
- Review employee pay and benefits to confirm that employees who perform substantially similar work are compensated at the same rate, to the extent there is not a legitimate business necessity warranting a pay differential.
- Review compensation and benefits policies and practices, including the process and analysis by which compensation determinations are made, to ensure that such policies and practices are documented appropriately and applied in a fair and equitable manner. If an employer’s compensation determinations are based on a seniority or merit system, the criteria applicable under such system and the manner in which it is applied should be carefully documented.
- Thoroughly document the process and analysis by which compensation determinations are made for each employee, regardless of whether a pay differential is determined to be appropriate with respect to the employee as compared to others doing substantially similar work. If a pay differential between employees who perform substantially similar work is deemed appropriate, employers should thoroughly document the legitimate job-related factors and business necessity justifying the differential. The better an employer can substantiate the legitimate bases for its determinations, the better protected it would be if an employee were to allege discrimination in compensation based on impermissible factors, such as sex, race, disability or national origin.
- Employers should review their compensation practices and structures to confirm they provide for equal pay and compensation for any and all employees who perform “substantially similar work.” Employers should also expect and prepare for employees to share information about pay with one another more freely, creating an increased level of transparency with respect to pay and benefits.
Certain employers may find the Equal Pay Act to be burdensome, however some employers may already have policies and practices in place that will comply with the Act. As with many other employment issues, an employer who takes reasonable action to comply with the Act today will likely avoid the potential for significant liability exposure and expense in the future.
BKC recommends that you consult your legal advisor for what policies and practices need to be followed to be in compliance with the new law.
Feel free to contact us with questions, or for a referral to legal council.
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