On April 24, 2018, the New Jersey governor signed the Equal Pay Act into law. This Act, which took effect on July 1, 2018, amended the New Jersey Law Against Discrimination (NJLAD) to add an equal pay section. This Act, unlike the federal Equal Pay Act, and many other state equal pay acts, ensures equal pay and benefits not just for women but for all protected classes listed in the NJLAD. The Act demands equal pay for "substantially similar work when viewed as a composite of skill, effort and responsibility." This standard is more lenient than the standard set forth in the federal equal pay provisions, which requires equal pay for "equal skill, effort, and responsibility," and it is unclear how broadly the courts will interpret this standard.
In order to pay a member of a protected class less than a nonmember for substantially similar work, an employer must prove that the differential is based upon seniority, merit, or one or more bona fide factors (not based on an employee's membership in a protected class). These one or more bona fide factors must not perpetuate any differential in compensation based on membership in a protected class, and must be applied reasonably, account for the entire wage differential, be related to the position in question, and be based upon business necessity. The requirement that a bona fide factor may not perpetuate any wage differential based on a protected class is a significant one. This essentially imposes a disparate impact claim for equal pay. It is also notable that a bona fide factor based upon business necessity will not be sufficient if it can be demonstrated that alternative business practices would serve the same purpose without resulting in a wage differential.
Perhaps the most surprising provision in the Act is its prohibition against employers reducing the pay of any employee in order to comply with the Act. This means that employers may not reduce the pay of higher-paid employees in an effort to even out salaries, but instead must raise any salaries for members of protected classes who are being paid less for substantially similar work, which could have an enormous financial impact upon employers. Another potentially huge financial impact is the Act's requirement that the comparison of wages be based upon wage rates in all of an employer's facilities.
The Act makes each occasion that an individual is affected by a discriminatory compensation decision an unlawful employment practice, and specifically states that this includes each payment of wages. This means every time an employee of a protected class is paid at a rate less than that of his or her counterpart who is not a member of a protected class, without a bona fide reason, an unlawful employment practice has occurred. This is important because it means the statute of limitations would start anew on each new discriminatory employment practice.
The Act prohibits employers from asking their employees to sign any waiver shortening the statute of limitations for any claim pursuant to the NJLAD, or retaliating against employees for, or requiring any agreement to waive, requests for information related to an employee's or other employees' compensation and benefits and their membership in a protected class.
The Act, which permits a private right of action, allows plaintiffs to recover lost wages for up to six years, which is triple the federal act's recovery time. The Act also imposes triple the damages in liquidated damages for any violation of this equal pay section of the NJLAD.
If they have not already, employers should immediately begin conducting privileged audits of salaries and related job duties to ensure that all employees who conduct substantially similar work are paid equal amounts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
