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Understanding The New Jersey Equal Pay Act

On April 24, 2018, Governor Phil Murphy signed into law the “Diane B. Allen Equal Pay Act,” which became effective on July 1, 2018. N.J.S.A. 34:11-56:13. The Act amends the New Jersey Law Against Discrimination (“LAD”), and prohibits pay disparities based upon characteristics protected by the LAD, such as race, creed, color, national origin, nationality, ancestry, age, or sex.

Specifically, the Act made it an unlawful employment practice 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 for substantially similar work, when viewed as a composite of skill, effort and responsibility.” N.J.S.A. 10:5-12(t). However, an employer may pay an employee who would otherwise be protected at a different rate of compensation if the employer demonstrates that the difference is based on: (1) a seniority system, (2) a merit system, or (3) a showing of five specific factors. Ibid. 

The employer must establish:

(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 a legitimate business necessity. A factor based on business necessity shall not apply if it is demonstrated that there are alternative business practices that would serve the same business purpose without producing the wage differential. Ibid.

The Act also broadened the various anti-retaliation provisions throughout the LAD and now applicable to the equal pay provisions by protecting an employee who has sought legal advice or shared information with a governmental entity. N.J.S.A. 10:5-12(d). Furthermore, no employer may require an employee to sign a waiver or require them to agree not to exercise their rights to complain about pay disparities. N.J.S.A. 10:5-12(r). The Act required that where an employee has shown they were discriminated against on the basis of pay, were retaliated against for raising the issue of pay disparity to an employer or other employees, or were required to sign a waiver of their rights to complaint, the judge shall award treble damages against the employer. N.J.S.A. 10:5-13. The Act also extended the statute of limitations applicable to allegations of pay inequity to six years. N.J.S.A. 10:5-12(a)s.

Lastly, the Act imposes additional requirements on certain employers who have entered into contracts with public bodies to provide either qualifying services or any public work. N.J.S.A. 34:11-56.14. These employers must provide, to the Commissioner of Labor of Workforce and Development, periodic reports detailing information regarding “the compensation and hours worked by employees categorized by gender, race, ethnicity, and job category.” Ibid.

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