New Jersey Passes Equal Pay Legislation Aimed at Closing the Wage Gap for All Protected Classes

by Fisher Phillips
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On March 27, 2018, New Jersey became the latest state to pass comprehensive equal pay legislation, and one of the first states to pass an equal pay law that extends protections beyond gender to all classes of employees that are protected under the state’s antidiscrimination law.    After unanimous support in the Senate and only two no votes in the Assembly, the Diane B. Allen Equal Pay Act was immediately signed into law by Governor Phil Murphy, who has made equal pay a priority since the first day of his administration.

New Jersey’s wage and hour law already prohibits employers from “discriminat[ing] in any way in the rate or method of payment of wages to any employee because of his or her sex.”  The Diane B. Allen Equal Pay Act expands this protection and amends the New Jersey Law Against Discrimination (“LAD”) to make discrimination in wages on the basis of any protected class an unlawful employment practice.  With the new law taking effect July 1, 2018, employers need to carefully analyze their existing pay practices to ensure compliance.

Key Language on Equal Pay

The law makes it an unlawful employment practice “[f]or an employer to pay any of its employees who is a member of a protected class at a rate of compensation, including benefits, which is less than the rate paid by the employer to employees who are not members of the protected class for substantially similar work, when viewed as a composite of skill, effort and responsibility.”

Similar to the federal Equal Pay Act and other states’ equal pay laws, there are a handful of legally permissible reasons for a different rate of compensation, including if the differential is based on a seniority system or merit system.  However, the “any other factor” catchall present in the federal law and other jurisdictions is much more precise under New Jersey’s law.  Specifically, other than a seniority or merit system, a different rate of compensation may only be permitted if the employer demonstrates:         

  • The differential is based on one or more legitimate, bona fide factors other than the characteristics of members of the protected class (like training, education, experience, or the quantity or quality of production);
  • The factor(s) are not based on, and do not perpetuate, a differential in compensation based on sex or any other characteristic of a protected class;
  • Each of the factors is applied reasonably;
  • One or more factors account for the entire wage differential; and
  • The factors are job-related with respect to the position in question and based on a legitimate business necessity, where there is no alternative business practice that would serve the same business purpose without producing the wage differential.

The comparison of wage rates is based on the wage rates in all of an employer’s operations or facilities, and is not limited to employees who work within a specific geographic area or region.

What Are The Protected Categories?

The list of protected categories in New Jersey is expansive.  Under the LAD, employers are prohibited from discriminating against an individual on the basis of any of the following: 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, or liability for service in the armed forces.

What Are The Damages Available to Prevailing Employees?

The law enhances damages that are available to a prevailing employee in a lawsuit filed under the LAD.  Typically, an employee would be awarded compensatory damages, punitive damages if the conduct was willful, attorney’s fees, and costs if they succeed on a claim of discrimination against their employer.

Under the Diane B. Allen Equal Pay Act, if a jury determines an employer discriminated on the basis of pay, the employee will be awarded treble damages – that is three times the amount of the pay differential. 

Treble damages would also be available to an employee who succeeds on a claim that the employer took reprisals against the employee for requesting from, discussing with, or disclosing to another employee or former employee, a lawyer from whom the employee seeks legal advice, or any government agency, information related to employee compensation.  The same enhanced damages are available to an employee who prevails on a claim that they were required, as a condition of employment, to sign a waiver or agree not to make these types of requests or disclosures.

The law also provides that an unlawful employment practice occurs each time the employee is affected by the discrimination in compensation.  That is, each occasion that wages, benefits, or other compensation are paid is a separate act of discrimination.  An employee can go back and obtain back pay for a period of six years.

What Can New Jersey Employers Do To Prepare?

The Diane B. Allen Equal Pay Act goes into effect July 1, 2018.  Over the next few months, employers should take steps to ensure that their existing pay practices and policies related to compensation result in equal pay for employees who do substantially similar work.  This should involve a pay audit, where the employer can determine whether there are any troubling pay disparities and, if so, take steps to remedy any differences that could be attributed to membership in a protected class.

It is important for employers to be proactive in order to ensure compliance with the new legal mandate and minimize the treble damages and other costs associated with future litigation by employees and negative attention that may result from a challenge to your company’s pay practices.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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