New Jersey Takes the Lead in Equal Pay Act Legislation

Following up on his January 16, 2018 Executive Order promoting equal pay for equal work, New Jersey Governor Phil Murphy signed a historic and sweeping equal pay law on April 24, 2018. The “Diane B. Allen Equal Pay Act” was named after former Republican Senator Diane B. Allen, herself a victim of bias, who was part of the original negotiations surrounding the bill when it was first proposed under former Governor Chris Christie. The new Equal Pay Act applies to all employers in New Jersey regardless of size and is scheduled to take effect on July 1, 2018. The new law combats not only gender pay discrimination but also wage discrimination against those protected by the New Jersey Law Against Discrimination (NJLAD).

Coverage

The Equal Pay Act amends the NJLAD and now makes it illegal for an employer to pay any employees who are members of a protected class recognized under the NJLAD at a lower compensation than other employees who are not members of a protected class, for “substantially similar work,” unless a pay differential is justified by legitimate business necessity. Under the NJLAD, protected classes include race, creed, sex, color, national origin, ancestry, nationality, disability, age, pregnancy or breastfeeding, marital, civil union or domestic partnership status, affectional or sexual orientation, gender identity or expression, military status, and genetic information or atypical hereditary cellular or blood traits. “Substantially similar work” is determined by a combination of the “skill, effort and responsibility” required for that position and is not limited to employees who work within a specific geographic area or region.

Moreover, although the legislation carves out an exception for differential pay based on certain factors like merit, seniority, and education, this exception is only so long as these factors do not perpetuate a sex-based differential in compensation. For example, if one employee has a different title than another employee or even works in a different department, but both employees perform the same types of tasks with similar levels of responsibility, both employees should be paid the same.

An employer may pay a different rate of compensation only if the employer demonstrates that the differential is made pursuant to a seniority system, a merit system, or 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 factors are not based on, and do not perpetuate, a differential in compensation based on sex or any other characteristic protected under the NJLAD;
  • Each of the factors must be 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.

Prohibitions

The new law also makes it easier for employees to win pay-discrimination cases since all they would need to show is that they were paid unequally for “substantially similar” work, rather than the previous standard of “substantially equal” work. Employers are also not permitted to reduce the rate of compensation of any employee in order to achieve compliance.

The new law also prohibits employers from retaliating against employees who (1) oppose any practices or acts forbidden under the Act; (2) seek legal advice regarding rights under the Act; (3) share relevant information with legal counsel or a governmental entity; or (4) file a complaint, testifies or assists in any proceeding.  The Act also forbids coercion, intimidation, threats or interference with any person in the exercise or enjoyment of, or on account of that person having aided or encouraged any other person in the exercise or enjoyment of, any right granted or protected by the Act.

Statute of Limitations

In addition to any other relief authorized by the NJLAD, liability under the new law shall accrue, and an aggrieved person may obtain relief for back pay, for up to 6 years, so long as the violations continue within the 6-year period. The law also makes it unlawful to require employees or prospective employees to consent to a shortened statute of limitations or to waive any of the protections afforded under the NJLAD.

Available Damages

In addition to the damages permitted under the NJLAD, the new law allows victims of discrimination to recover triple damages should a jury, or the New Jersey Division of Civil Rights, determine that the employer is guilty of an unlawful employment practice as defined by the law.

Reporting Obligations

To ensure companies doing business with the state comply, companies that win contracts from public agencies are required to submit reports to the Commissioner of Labor and Workforce Development. These reports would need to include the gender and race of employees in every job title or pay band, and the total compensation for each category of employees.

Bottom Line

Employers should carefully analyze their existing pay practices to ensure compliance. Prior to July 1, 2018, employers must review the current job descriptions, employee handbooks and policies to determine which employees perform “substantially similar work” in order to ensure they are being compensated at the same rate. If, after doing this review, there is a pay differential, the employer must be able to show that the difference is not based on sex or any other characteristic of members of a protected class. Existing handbooks and policies must also be revised to prohibit pay discrimination for substantially similar work, and prohibit retaliation against employees who request, discuss or disclose compensation or other job-related information covered by the law. Human resources and benefits personnel should also be trained on the new requirements and managers should also receive updated training.

Employers must also be aware that the provision for back pay damages is much more extensive than federal law, and the possibility of treble damages should a jury find that an employer is guilty of an unlawful employment practice should serve as a powerful deterrent to correct discriminatory pay differentials.  Lastly, employers who work with public entities must ensure that payroll records and other information regarding the “gender, race, job title, occupational category and rate of compensation” of every employee that is part of the project is up to date and sent to the public entity.

For more information regarding the impacts of this legislation and how to implement nondiscriminatory pay practices, please contact John C. Petrella, Esq., Chair of the firm’s Employment Litigation Practice Group, at jpetrella@nullgenovaburns.com, or Dina M. Mastellone, Esq., Director of the firm’s Human Resources Practice Group, at dmastellone@nullgenovaburns.com or 973-533-0777.

New Jersey Governor Phil Murphy Signs First Executive Order for Equal Pay and Gender Equality

In his first official act as Governor of the State of New Jersey, Governor Phil Murphy issued an Executive Order on January 16, 2018 promoting equal pay for equal work in New Jersey. The Executive Order, which is set to take effect February 1, 2018, provides that all New Jersey workers should be compensated based on their work and the services they provide, regardless of gender. The Executive Order further states that currently, women of all ethnicities in New Jersey who hold full-time, year-round jobs are paid less than men in those same positions.

Fulfilling a campaign promise and following in the footsteps of other states and major cities around the country, the Governor’s Office seeks to fix this wage gap in various ways. Since asking for prior compensation information can be part of the application process, the Executive Order directs that no State entity is permitted to ask employment applicants about their current or previous salaries until after a conditional offer of employment has been made. In the event an applicant refuses to volunteer such information, that refusal cannot be considered in employment decisions. If a State entity does have a job applicant’s compensation information, that information cannot be used in an employment decision. Further, the Executive Order provides that State entities can only request and verify current or previous compensation information prior to a conditional offer of employment if such information was voluntarily provided or if verification is required by federal, state, or local law.  A “State entity” is definied in the Executive Order as “any of the principal departments in the Executive Branch of State government and any agency, authority, board, bureau, commission, division, institution, office, or other instrumentality within or created by any such department, and any independent State authority, commission, instrumentality, or agency over which the Governor exercises executive authority, as determined by the Attorney General.”

To enforce this Executive Order, the Governor’s Office of Employee Relations is tasked with overseeing the implementation and training of staff at State entities so that they can comply. For those who are improperly asked about their salary history, such violations can be reported to the Governor’s Office of Employee Relations. Reporting such violations to the Governor’s Office of Employee Relations is the sole remedy, as the Executive Order does not create a private right of action for employees or prospective employees in the event they are improperly asked about their salary history.

Although the Executive Order only impacts State entities, Governor Murphy indicated that he would make it state law if the Legislature presents him with a bill extending these protections to private businesses.  California, Massachusetts, Delaware, Oregon, and several other U.S. cities, including New York City, Philadelphia, and San Francisco, have all enacted policies that prohibit employers from asking about prospective employees’ salary histories.

For more information regarding the potential impacts of this Executive Order and how to implement nondiscriminatory pay practices, please contact Dina M. Mastellone, Esq., Director of the firm’s Human Resources Practice Group, at dmastellone@nullgenovaburns.com or 973-533-0777.

Proposed NJ Equal Pay Bill Could Lead to More Wage Gap Disputes if Passed

On February 4, 2016, a bill that would close the wage gap amongst women and men advanced out of the New Jersey Senate Labor Committee.  On average in New Jersey, studies have shown that women make 80.4 cents for each dollar a man earns, making it slightly more than the national average of 79 cents.  Further, the wage gap is larger for African-American and Latina women, who make 58.1 cents and 42.7 cents, respectively, for every dollar men earn. If signed into law, the new Equal Pay Bill (Senate Bill 992) will amend the New Jersey Law Against Discrimination (LAD).

What Will the New Equal Pay Law Require?

The two year statute of limitations for pay discrimination claims would restart with each unlawful paycheck that is issued by the employer. The new law would allow employees to file claims after termination if the employee was unaware that the pay disparity existed during the course of his or her employment. The proposed bill will also expand back pay awards for successful plaintiffs for the entire period of time if the violations continued to occur within the statute of limitations. Employers will also be prohibited from requiring employees or prospective employees to consent to the shortening of the statute of limitations period or to waive any violations of the law.

The Equal Pay Bill will also require employers to prove that any disparity in pay was based on a factor other than sex, such as a seniority system, a merit system, training, education or experience (including position title), or the quantity or quality of production.  Employers would also have to prove that reasonable application of these factors accounts for the entire wage differential, that the factors are job-related and consistent with job necessity, and that there were no other alternative business practices that would serve the same purposes without causing a difference in pay between female and male employees. Employers will also be prohibited from retaliating against employees for disclosing information about job title, occupational category, and rate of compensation of any employees or former employees.

What Should Employers Do Now?

Given the increased fervor to close the pay gap for women and minorities, the advancement of the new Equal Pay Bill and U.S. Equal Employment Opportunity Commission’s new requirements with regard to EEO-1 pay data reporting beginning in 2017, the time is now for employers to begin to take preemptive action to correct any discriminatory pay practices that may exist.

  • Employers should review and update their policies to ensure that employees are not discriminated against or retaliated against for discussing or questioning compensation.
  • Employers must ensure that their wage rates in all of their operations and facilities are similar and should document that their pay-related decisions are based on a legitimate, business necessity.
  • Managers and supervisors should also be trained to comply with the employer’s nondiscriminatory pay practices.
  • Employers who are engaging in pay disparity can certainly expect an increase in pay discrimination cases both under the LAD as well as cases brought by the EEOC for illegal pay practices.

For more information regarding the potential impacts of this legislation and how to implement nondiscriminatory pay practices, please contact Dina M. Mastellone, Esq., Director of the firm’s Human Resources Practice Group, at dmastellone@nullgenovaburns.com or 973-533-0777.