New Jersey Employers Must Take Immediate Action in Anticipation of the State's New Equal Pay Law

June 5, 2018

During the past few months, New Jersey has taken several leaps forward in the realm of labor and employment law, arguably solidifying its spot amongst the leaders in the recent push for increased employee protections.

Perhaps the most significant of these moves was Governor Phil Murphy's signing into law of the Diane B. Allen Equal Pay Act (the Equal Pay Act, or, the law) on April 24, 2018, to go into effect on July 1, 2018.

The Equal Pay Act expands the New Jersey Law Against Discrimination (LAD) in the attempt to abolish the "wage gap" and establish equal pay not only for women, but for all employees who are members of a protected class under the LAD. The law aims to accomplish this via two avenues: (1) specific rules requiring equal pay for equal work; and (2) new reporting requirements for state contractors.

Equal Pay for Equal Work
The most substantial portion of the Equal Pay Act makes it unlawful to pay any employee who is protected by the LAD "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." In the case of any rate differential between similarly situated employees, there is a presumption of discrimination unless and until an employer can prove that the rate differential is due to legitimate reasons such as a seniority system, merit system or the employer must prove that:

1.) 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, experience or the quantity/quality of production;

2.) The factor(s) are not based on, and do not perpetuate, a differential in compensation based on any characteristic of members of a protected class;

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 are based on a legitimate business necessity.*

*A factor "based on business necessity" does not apply if there are alternative business practices that would serve the same business purpose without producing the wage differential.

Additional Provisions:
In determining whether or not a wage or benefit rate differential exists, employers must compare the pay practices throughout all of their operations and facilities. Furthermore, once the Equal Pay Act goes into effect employers will be prohibited from lowering any employee's wage or benefit rate as part of their efforts to come into compliance.

Employers cannot require employees to waive their protections under the law or agree to shorten the statute of limitations. Employees are also protected from retaliation when they seek, share, or discuss legal advice or information regarding employee rights under this law.

New Obligations for Public Contractors
Beginning July 1, 2018, any employer who contracts with the state (or any agency/instrumentality of the state) must provide a report to the Commissioner of Labor and Workforce Development detailing information on its employees' compensation and hours worked. The report must be organized in pay bands, categorized by gender, race, ethnicity and job category, and submitted on a form that the Commissioner will publish. Employers must submit such reports for each of their establishments.

Consequences of Violations
An offense occurs each time an employee is affected by a discriminatory compensation practice or decision, thus continually resetting the statute of limitations. Successful plaintiffs may obtain triple damages for back pay, extending back for six (6) years.

Next Steps
Alongside legal counsel, employers should conduct a business-wide assessment of wage and benefit rates, job descriptions, employee qualifications and any other factors that go into decisions regarding compensation to determine whether or not any modifications need to be made prior to July 1, 2018. Going forward, employers should establish a method by which employee compensation is determined so as to comply with the new law. Any employees with the authority to set wages and benefits should be fully aware of the provisions of the Equal Pay Act so as to facilitate continued compliance. Employers that contract with the state should take any steps needed to prepare for the additional reporting requirements beginning July 1, 2018.

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Drogin, Laurent S. Partner and Chair of Labor and Employment Practice and Co-Chair of Restrictive Covenant Practice Partner and Chair of Labor and Employment Practice and Co-Chair of Restrictive Covenant Practice 212.216.8016 VCard

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