While many residents of this State will agree that everyone should be paid equally, regardless of gender or any other protected characteristic, business owners need to immediately review pay disparities between their employees, and adjust accordingly. Such adjustments must only increase compensation as, according to the law, employers are prohibited from reducing the rate of compensation of any employee in order to comply with the law. Similar legislation was introduced during Chris Christie’s tenure as Governor, but he vetoed such measures.
In essence, this new law, known as the Diane B. Allen Equal Pay Act (“Equal Pay Act”), signed by Governor Murphy on April 24, 2018, which takes effect on July 1, 2018, significantly strengthens an already robust anti-discrimination New Jersey statute, known as the Law Against Discrimination (“LAD”). The LAD prohibits unlawful employment discrimination based on an individual's race, creed, color, national origin, nationality, ancestry, age, sex (including pregnancy), familial status, marital/civil union status, religion, domestic partnership status, affectional or sexual orientation, gender identity and expression, atypical hereditary cellular or blood trait, genetic information, liability for military service, and mental or physical disability (including perceived disability, and AIDS and HIV status). Due to the strength of the LAD, most discrimination cases in New Jersey are filed in State Court, thus bypassing stricter federal laws such as Title VII, the Americans with Disabilities Act (“ADA”) and the Age Discrimination in Employment Act (“ADEA”). The LAD incorporates the substance of all such federal laws and provides stronger damage provisions as well as a longer statute of limitations for the filing of such clams. Moreover, Title VII and the ADA are inapplicable to businesses which employ less than fifteen employees (twenty for the ADEA to be applicable), while the LAD is applicable to businesses with just one employee.
The Equal Pay Act strengthened the LAD as it is now considered a discriminatory practice to pay a rate of compensation, including benefits, to employees of a protected class 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. While limited exceptions apply, such as permitting an employer to pay a different rate of compensation to an employee if the employer demonstrates that the differential is made pursuant to a seniority or merit system, or is based on legitimate, bona fide factors other than sex or other characteristics of members of a protected class, such as training, education, experience, or the quantity or quality of production, business owners must review their employees’ compensation to better ensure they are acting within the confines of the new law. This is important, as the law adds a new component of damages to the LAD – treble damages – which means if an employee successfully litigates against her employer for a violation of the revised LAD, the amount of monetary damages awarded to the employee will be tripled. Tripling of damages can certainly be crippling to ongoing business operations. Thus, reviewing employee compensation and adjusting accordingly is of paramount importance.
Another provision of the Equal Pay Act which could have serious implications for employers is the Act’s six-year look-back period. In essence, if a violation of the Act can be established, employees can obtain owed back pay for the six years prior to the last violating pay discrepancy. This is an increase in the look back period as compared to the Lily Ledbetter Fair Pay Act, signed into law by President Obama in 2009, which provided for a two year look back period. The additional four years of scrutiny, as well as the treble damages component previously mentioned, are significant issues for the business owner in New Jersey to consider when resolving pay disparity between employees. Moreover, the Equal Pay Act prohibits employers from taking reprisals against employees for discussing their pay with others.
As a result of this Act, employers should expect a significant increase in litigation relating to employment. While the campaign promises made by Governor Murphy were focused on closing the gender gap on pay disparity (similar to the Lily Ledbetter Act), the Equal Pay Act goes well beyond the gender gap and encompasses employees of all protected characteristics pursuant to the LAD. In essence, when an employee is separated from employment, the risk is low for the employee, and significant to the employer, for the employee to claim she was paid less than her counterparts on account of her (fill in the blank – race, gender, age, disability, religion, sexual orientation, etc.). Due to the anticipated increase in employment-related litigation, preventative steps, at this early juncture, can help avoid or minimize anticipated risks.