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New Jersey Governor Signs Into Law Long-Awaited Pay Equity Legislation

On April 24, 2018, Governor Phil Murphy signed into law the Diane B. Allen Equal Pay Act (“Act”), which was passed almost unanimously by the State legislature about a month ago.  The Act, which becomes effective July 1, 2018, amends the New Jersey Law Against Discrimination (LAD), making pay equity provisions part of the already broad coverage provided by the LAD.  Subject to certain defined limitations, the Act requires pay equity among those employees who perform “substantially similar work.”  In large part, particularly because of the genesis of this law as reflected in its name, this means that employers are required to pay men and women the same if they are performing “substantially similar work,” but employers need to be aware that this Act applies more broadly.  It states that it shall be unlawful for 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.”  Thus, the Act is not only applicable to pay differentials based on gender, but also applies to all protected classes under the existing LAD.

A different rate of pay is permissible “only if the employer demonstrates that the differential is made pursuant to a seniority system, a merit system, or the employer demonstrates: “(1) That the differential is based on one or more legitimate, bona fide factors other than the characteristics of members of the protected class, such as training, education or experience, or the quantity or quality of production; (2) That the factor or factors are not based on and do not perpetuate a differential in compensation based on sex or any other characteristic of members of a protected class; (3) That each of the factors is applied reasonably; (4) That one or more of the factors account for the entire wage differential; and (5) That the factors are job-related with respect to the position in question and based on legitimate business necessity.”  Notably, if an employer is in violation of the Act because of a prohibited pay differential, the Act precludes the employer from “reducing the rate of compensation of any employee in order to comply” with the Act’s pay equity requirements.

Employers are also prohibited from retaliating against an employee who: seeks legal advice regarding his or her rights under the Act, shares relevant information with their counsel, or discusses or discloses to any other employee or former employee of the employer, information such as job title, occupational category, rate of pay and benefits.

The potential exposure for employers found to violate the Act can be significant.  The Act allows for employees to sue for up to six years of back pay, and this provision is buttoned up with a provision prohibiting employers from requiring employees or applicants to agree to a shortened statute of limitations.  In addition, employers are subject to treble – yes, that’s triple – damages, if an employer is found to be in violation of the new pay equity sections of the law (including the anti-reprisal section).  In that instance, the court “shall award three times any monetary damages to the person or persons aggrieved by the violation.”

The bottom line?  The Act is big news for New Jersey’s employers.  This changes the fabric of pay practices in New Jersey and provides employees in protected classes with further protections under the law.  There are plenty of potential missteps in setting compensation and benefits, and this Act has expanded on the already wide protections under the LAD.  It is important for employers to remember that while the Act has been touted primarily as providing gender pay equity, it applies to all protected classes of employees covered by the LAD – that is, employees with one or more protected characteristics: 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.  Employers should use the limited time they have – prior to the Act’s effective date, which is just weeks away – to review their compensation scales, polices, and procedures, and undertake a careful analysis to be sure they will be in compliance with the requirements of this new Act.

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