Locke Lord QuickStudy: New Jersey Touted as the New Leader in Pay Equity

Locke Lord LLP
April 25, 2018
April 24, 2018, Governor Phil Murphy signed into law the Diane B. Allen Equal Pay Act. It is believed to be the most comprehensive pay equity law in the country. As an initial matter, unlike most other recently enacted pay equity laws, New Jersey’s law is not gender specific and extends the statute of limitations to six years. The law becomes effective July 1, 2018.

The law covers all members of protected classes covered under the New Jersey Law Against Discrimination (“LAD”) and the law bans unequal pay for substantially similar work defined as a “composite of skill, effort and responsibility.” The law allows alleged victims of discrimination to sue for up to six years of back pay, which is three times that allowed under federal law. If the employee is able to prove a claim for unequal pay, monetary damages will be triple the amount lost in each year by the employee.

The Bill will also do the Following:

  • Employers are prohibited from paying rates of compensation, including benefits which are less than rates paid to employees who are members of a protected class for substantially similar work. Importantly, employers may not lower rates of compensation in an effort to equalize compensation and comply with the law. 
  • The law also prohibits and expands the definition of retaliation against employees for discussing their pay with others.
  • Employers who are awarded contracts from agencies of the State of New Jersey must submit to the Commissioner of Labor and Workforce Development reports which include the gender and race of employees in every position title or pay band and the total compensation for each category of employees. 

An Olive Branch to Employers

  • A lower rate of compensation to a member of a protected class can be paid by an employer in those instances where the employer demonstrates that the compensation differential is based on a seniority system or merit system.
  • The employer can also pay a lower rate of compensation to a member of a protected class when the differential is based upon one or more legitimate bona fide factors such as training, education or experience, or the quality or quantity of production.

The Burden is on the Employer when Utilizing Factors to Defend a Differential in Compensation

  • The factors used by the employer must not be based on, and must not perpetuate, a differential based on sex, race or other protected characteristic;
  • There must be a reasonable application of the factor applied;
  • The factors must account for the entire wage differential; and
  • The factors must be job-related and based on a legitimate business necessity unless there are alternative business practices that serve the same business purpose without producing the wage differential.

Final Notes

Critics of the new law believe it will  enable aggressive litigants to demand a look back at salaries for a period of six years when there is no meritorious basis to do so.