An important amendment to the New Jersey Law Against Discrimination (“LAD”) was enacted April 24, 2018, and goes into effect July 1, 2018. Called the “Diane B. Allen Equal Pay Act” (“Equal Pay Act” or “Act”) this new law has important implications for employees and employers.
What does the Equal Pay Act Do?
The Equal Pay Act requires equal pay for employees who are members of a protected class under the LAD. A “member of a protected class” means an employee who has one or more characteristics, including 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 which are protected from discrimination under the LAD.
The Act makes it unlawful for an employer to discriminate against an employee because the employee is a member of a protected class by paying a rate of compensation, including benefits, which is less than the rate paid to employees not of the class for substantially similar work, when viewed as a composite of skill, effort and responsibility. The Act also prohibits an employer from reducing the rate of compensation of any employee in order to comply with the law.
An employer is permitted to pay a different rate of compensation if the employer demonstrates that the difference is based on a seniority system, a merit system, or other legitimate, bona fide factors such as training, education, experience, or the quantity or quality of production. These factors must be job-related, based upon legitimate business necessities, and applied reasonably, so that one or more of the factors account for the entire wage differential.
The Act also prohibits an employer from acting against an employee for discussing or disclosing a range of employee information (job titles, occupational categories, rates of compensation, gender, race, ethnicity, military status, or national origin) with other persons, including employees or former employees, attorneys, or government agencies.
It also prohibits an employer from requiring an employee or prospective employee to agree upon a shortened statute of limitations, or otherwise waive any protections under the LAD.
What Records Are Employers Required to Maintain?
Employers who enter into a contract to provide services (including professional services) for the State of New Jersey, and its agencies, are required to provide the New Jersey Commissioner of Labor and Workforce Development a report with information regarding the compensation and hours worked by employees categorized by gender, race, ethnicity and job category. Employers who perform public work for a public body subject to New Jersey’s prevailing wage laws shall include this information in its certified payroll records.
What are the Penalties for Violation?
The Equal Pay Act provides that a violation occurs each time that discriminatory compensation is paid. This restarts the statute of limitations governing discriminatory compensation claims under the LAD, effectively making each paycheck a new or continuing violation. Additionally, an aggrieved employee may obtain relief for up to six years of back pay. The Equal Pay Act also requires three times that amount of monetary damages must be awarded in court cases where a jury finds the employer guilty of a violation. The LAD’s fee-shifting provision also applies, meaning that a prevailing employee may also apply for payment of her or his attorney’s fees.
How Does the Equal Pay Act Affect Employees?
The Act has been described as giving New Jersey “the strongest equal pay laws in the nation.” The main beneficiaries are expected to be women, who have historically earned less than men. However, the new law is not limited to pay disparities affecting just women; rather, its terms encompass the rights and remedies of all protected class members, based upon 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.
How Does the Equal Pay Act Affect Employers?
For employers, the Act requires an immediate, careful review of the compensation and hours worked by employees by gender, race, ethnicity, and job category. Although the reporting requirements apply only to employers who contract to provide services or perform public work for a public body subject to prevailing wage laws, the prudent employer will make such an analysis regardless, to identify potential issues before they become the basis for litigation. Consultation with the employer’s insurance professional to explore the availability of employment practices insurance coverage for Equal Pay Act claims is also recommended.