Employers Should Take Notice of New Jersey’s Expected Equal Pay Law

Thomas J. Szymanski

The Diane B. Allen Equal Pay Act (“Act”), directed at remedying discriminatory pay practices in the workplace, was passed by both houses of New Jersey’s Legislature and awaits the signature of Governor Phil Murphy. This is not the first time that the New Jersey Legislature has passed a bill modeled after the federal Lilly Ledbetter Fair Pay Act of 2009, which made it easier to pursue pay-discrimination lawsuits—former Governor Chris Christie previously vetoed nearly identical versions of this bill, based on his stated belief that they were overly-expansive and bad for business. Governor Murphy has pledged to sign the current version of the Act into law, with an anticipated effective date of July 1, 2018. Some of the Act’s provisions, notably those providing for treble damages and a six-year look back period, could provide more employees with much greater relief for violations than the federal Ledbetter Act or other state equal pay laws.

Brief Summary of the Act

The Act provides for:

  • Broad prohibitions against unequal pay and benefits for “substantially similar” work, as enforced under the New Jersey Law Against Discrimination (“LAD”).
  •  Coverage for a broad array of “protected classes,” including “race, creed, color, national origin, nationality, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, pregnancy, sex, gender identity or expression, disability or atypical hereditary cellular or blood trait of any individual, [and/]or liability for service in the armed forces” thus making it unlawful to engage in wage discrimination against members of protected classes who are covered by the LAD.
  •  A requirement that a different rate of compensation be justified by “legitimate, bona fide factors,” including, but not limited to, training, education, and/or experience.
  • A prohibition against employers cutting the wages of higher-paid employees in order to make salaries comparable.
  • A prohibition against employers from retaliating against employees for disclosing or discussing compensation.
  • Each paycheck that contains an unequal pay rate counting as a separate act of discrimination that resets the statute of limitations.
  • A six-year look back period for damages (which provides a significantly longer look back period than under the federal Ledbetter Act and similar state equal pay laws).
  • Recovery of treble damages by successful litigants—three times as much as they were denied in compensation (which provides for more significant penalties against employers who are found to have violated the Ledbetter Act or other state equal pay laws), as well as attorneys’ fees.

Employers that contract with the State of New Jersey will be required to maintain transparency related to employee demographic, occupation, and compensation information and submit a report to the Department of Labor and Workforce Development with “information regarding the compensation and hours worked by employees categorized by gender, race, ethnicity, and job category.”

Next Steps for Employers

To reduce possible exposure to the significant costs associated with violation of the Act, as well as negative publicity, employers should be proactive and ensure compliance with the Act. Ensuring compliance will require that employers:

  • Review and update employee handbooks and pay policies and procedures to comply with the new requirements of the Act, including allowing for transparency in pay and providing a mechanism for employees to report claims of pay inequity.
  • Consider auditing pay data (including salary or wages, benefits, and bonus eligibility) to evaluate and remedy, as needed, any pay differences that could be attributed to membership in one of the protected classes.
  • Review and revise recordkeeping policies and procedures related to pay practices (including initial pay determination, pay increases, and other payments/benefits) to ensure these decisions are documented and preserved to reflect the bona fide business purposes driving any pay-related job differences.
  • Prepare to promptly respond to and investigate concerns and complaints regarding pay inequity, including clearly communicating:
    • the policy prohibiting pay discrimination;
    • the policy prohibiting retaliation for complaining of or discussing pay; and
    • the ultimate investigation conclusions that were reached following an impartial review.
  • Review all posting and notice requirements set forth by the United States Department of Labor and New Jersey Department of Labor and Workforce Development to ensure compliance.

Moreover, employers that contract with the State of New Jersey should begin taking steps to comply with the proposed reporting requirements.

Please do not hesitate to reach out to us with any questions.

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