NJ Passes Equal Pay Act, Dramatically Expanding Liability for Wage Discrimination

April 24, 2018Alerts Labor & Employment Alert

New Jersey has enacted one of the most aggressive equal pay laws in the nation. The Diane B. Allen Equal Pay Act, signed by Gov. Phil Murphy, will take effect on July 1, 2018, significantly expanding the range of wage discrimination protections afforded to employees.

In light of the breadth of changes reflected in the new law, employers should begin reviewing their practices to ensure compliance before July.

The new law amends the New Jersey Law Against Discrimination to render unlawful any employment practice that results in discrimination in “compensation or in the financial terms or conditions of employment” for the performance of “substantially similar work, when viewed as a composite of skill, effort and responsibility.”

Unlike its federal counterpart, the Lilly Ledbetter Fair Pay Act (LLFPA), which regulates only wage discrimination across sex, the NJ law will apply to employees across all protected classes recognized under the LAD, including, but not limited to, sex, race, creed, color, national origin, and age.

Notably, the NJ Equal Pay Act provides a six-year statute of limitations – three times longer than the two-year period provided under existing federal law. Similar to the LLFPA, an employer may be held liable each time an employee has been impacted by a “discriminatory compensation decision or other practice” (e.g., a discriminatory paycheck) up to, but not longer than, six years if the violation has been continuous and persists within the limitations period.

This means employers may be held liable for up to six years of back pay. It will be unlawful to require an employee to consent to a shortened statute of limitations period or to waive any of the protections of the LAD.

The equal pay legislation inverts the traditional burden of proof provided by most state and federal laws by creating a presumption of illegal discrimination wherever any employee is paid less in wages/benefits than a similarly situated employee of another protected class. To defend against such an arrangement, employers may rely on a “seniority” or “merit” system. In the absence of such a system, employers would be required to demonstrate that:

  • The differential is based on one or more legitimate, bona fide factors other than characteristics of the protected class, such as training, education or experience, or the quantity or quality of production;
  • That these bona fide factors do not perpetuate a differential in compensation based on sex or any 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 differential; and
  • That the factors are job-related with respect to the position in question and based on legitimate business necessity.

Employers setting forth this affirmative defense would be obligated to compare compensation across all operations or facilities, and not only the complainant-employee’s work location. Employers will be required to engage in this particularly arduous exercise to justify each purported discriminatory pay decision. It will be unlawful to reduce employee wages in order to comply with the law.

There are additional provisions in the bill that will impact many New Jersey employers. For example, state contractors will be mandated to report to the Commissioner of Labor and Workforce Development information regarding gender, race, ethnicity, and job category and total compensation of every one of its employees employed in New Jersey working on a particular state contract.

Employers are prohibited from retaliating against employees for “discussing with, or disclosing to” any other employee or former employee, counsel, and/or a governmental entity relevant information concerning compensation and benefits. Whether a complaint is before a jury or the New Jersey Division of Civil Rights, employees would be able to recover treble damages, or three times the amount of any pay differential, in the event of a violation.

As detailed in our earlier alert, Gov. Chris Christie conditionally vetoed a version of this legislation in May 2016, calling the bill “very business unfriendly.”

All businesses with employees in New Jersey should take heed of the key provisions in this dramatic new legislation and immediately begin taking preventative measures. Examples of some measures of preemptive compliance include, but are not limited to:

  • Ensuring that compensation is tied to legislatively prescribed “bona fide” factors, such as training, education or experience or the quantity or quality of production;
  • Auditing employee job titles and job descriptions in concert with the applicable compensation arrangements;
  • Documenting and reviewing pay differentials across “substantially similar” jobs and evaluate whether such differences are justified under the bona fide factors; and
  • Training human resources personnel involved in compensation and benefits matters on this new legislation.

For more information about this alert or if you have any questions or concerns, please contact Asad Rizvi at 973.994.7817 or [email protected], Christina A. Stoneburner at 973.994.7551 or [email protected], or any member of Fox Rothschild’s Labor & Employment Department.

This publication is intended for general information purposes only. It does not constitute legal advice. The reader should consult with knowledgeable legal counsel to determine how applicable laws apply to specific facts and situations. This publication is based on the most current information at the time it was written. Since it is possible that the laws or other circumstances may have changed since publication, please call us to discuss any action you may be considering as a result of reading this publication.