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Employers Need to Consider NJ Pay Equity Law When Evaluating Employee Pay Practices

By on July 13, 2018 in Legislation with 0 Comments

Background

The Diane B. Allen Equal Pay Act, one of the most pro-employee equal pay laws in in the nation, took effect on July 1, 2018. The law expands the already broad and expansive New Jersey Law Against Discrimination (“NJLAD”) by strengthening protections against employment discrimination and pay inequity.  Though many think the law only requires employers to pay women and men the same for equal work, the Act goes far beyond addressing gender-based wage disparities and applies to all members of a protected class performing “substantially similar work, when viewed as a composite of skill, effort and responsibility.”   The NJLAD defines a member of a protected class as “an employee who has one or more characteristics, 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, or liability for service in the armed forces.”  Simply, the law creates a cause of action against employers that pay an employee, who is a member of a protected class, less than the rate paid to employees who are not members of the protected class.  In view of the broad range of characteristics and expansive interpretation of such characteristics under NJLAD jurisprudence, the law could apply to a significant number of employees within an employer’s workforce.

Factors that May Justify Disparity in Pay

The new law does provide limited instances where employers may pay employees differently for similar work if the employer can show that it was based on a “seniority system” or “merit system, or if the employer can establish the following criteria:

  1. the pay differential is based on one or more legitimate, bona fide factors, such as training, education or experience, or the quantity or quality of production;
  2. the factors are not based on, and do not perpetuate a differential in compensation based any protected characteristic;
  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(ies).  However, a factor based on business necessity would not apply “if it is demonstrated that there are alternative business practices that would serve the same business purpose without producing the wage differential.”

 

Expanded Anti-Retaliation Protections under the NJLAD

The law also extends the anti-retaliation provisions under the NJLAD to this newly created equal pay cause of action. Previously, the NJLAD only prohibited an employer from retaliating where the request from a current or former employee was for the purpose of investigating or taking legal action regarding discriminatory compensation.  The new law now prohibits retaliation against employees for “requesting from, discussing with, or disclosing to, any other employee or former employee of the employer, a lawyer from whom the employee seeks legal advice, or any government agency” pay information. Such information includes but is not necessarily limited to job title, occupational category, rate of compensation, including benefits, and the gender, race, ethnicity, military status, or national origin of the employee or any other employee or former employee, regardless of whether the employee receives a response.

Expanded Damages and Limitations Period Under NJ’s Pay Equity Law

The law’s provisions for back pay damages are also more extensive than federal law and allows employees to recover treble damages if they can show they were discriminated against on the basis of pay, if they were retaliated against for raising the issue of pay disparity to an employer or other employees, or if they were required to waive their rights to complain about pay disparities.  The law provides for punitive damages if a court finds that an employer’s conduct was willful.  Finally, the statute of limitations for pay equity violations under the law was extended to six years.  The expanded statute of limitations provides that the limitations period restarts each time “an individual is affected by application of a discriminatory compensation decision or other practice,” including each time the individual receives compensation that results, in whole or in part, from a discriminatory decision.  It is also now an unlawful employment practice to require employees or prospective employees to “consent to a shortened statute of limitations or to waive any of the protections” provided by the LAD.

Additional Reporting Requirements for State Contractors

The statute also contains a mandatory reporting requirement for any employer entering into a contract with the State of New Jersey (“State”) or an agency or instrumentality of the State for “qualifying services” or “public works”.  Contracting employers must provide the New Jersey Department of Labor and Workforce Development (“NJLWD”) – upon commencement of the contract – wage and demographic data for all employees who are employed in connection with the contract (for public works) and for all employees (for qualifying services). Simply, any employer, regardless of location, who enters into a contract with the State or any agency or instrumentality of the State qualifying services or public work must file a report with the NJLWD.  For employers filing Reports for Qualifying Services, Reports must be submitted annually by March 31 for the preceding year, using employment figures from any pay period in October through December. For employers filing Reports for Public Works Projects, Reports must be submitted weekly.

Going Forward

As New Jersey’s new law is one of the most expansive employee pay equity protections enacted to date, it is more important than ever for employers to consult with legal counsel to take proactive steps, including review of your compensation records and systems to identify positions where there is potential unequal pay for substantially similar work and determine whether that pay discrepancy is warranted based on one of the recognized justifications. This should also include working with counsel to review compensation policies and job descriptions to ensure that differentiation in pay is based on a defensible factor and maintain data on how these factors informed compensation decisions.

For more information regarding the impacts of this Law, determining applicability of reporting requirements to your organization, and how to implement nondiscriminatory pay practices please contact William R. Burns, Esq. at wburns@capehart.com or Primitivo J. Cruz, Esq. at PCruz@capehart.com.

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