Employers Guide: New Jersey Equal Pay Act

Employers Guide

New Jersey Equal Pay Act

2019 Employer’s Guide to New Jersey’s Equal Pay Act

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BACkground On April 24, 2018, Governor Phil Murphy signed into law New Jersey’s Diane B. Allen Equal Pay Act.

navigate this new law and avoid potential penalties.

Effective July 1, 2018, it is an amendment to the New Jersey Law Against Discrimination and provides enhanced equal pay protection. The Act prohibits pay disparities based upon all of the protected classes found in the New Jersey Law Against Discrimination. This new law impacts every public and private employer with at least one employee located in New Jersey.

The State of New Jersey maintains a website that provides information about New Jersey’s Equal Pay Act and links to forms for the required reports that must be filed by employers who contract with public bodies.

Porzio’s team of employment attorneys have created this guide to help employers, HR professionals, business owners, and others

https://nj.gov/labor/equalpay/equalpay.html

What Employers Are Not Allowed To Do Employers cannot require employees to waive these rights.

An employer cannot pay an employee who is a member of a protected class less compensation than employees who are not members of the protected class and who are doing substantially similar work.

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Compensation is not limited just to salary. It includes all monetary benefits, such as commissions, bonuses, paid time off, expense accounts, and retirement plans.

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There is no exact definition of “substantially similar work,” but the Act indicates that it is based on a “composite of skill, effort, and responsibility.”

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The comparison of wages is not limited to employees in the same location.

Instead, it covers the wage rates in all of an employer’s facilities.

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An employer cannot reduce the salary of any employee to correct a pay differential (only permitted to increase employees’ salaries to comply with the law).

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Employers are prohibited from retaliating against employees for discussing or disclosing to others certain information concerning their employment.

Employers cannot prevent employees from discussing their salary or benefits with their co-workers.

What Employers Are Allowed to Do Even though the restrictions seem overwhelming, there are some things an Employer can do to protect itself.

Seniority System - This should be based on more than merely years of service. An employer should be able to point to a system based either in the employer’s policy or in a union contract that sets a pay scale based on years of service. If the seniority pay scale appears in an employer’s policy, the criteria for determining compensation under such a system and how it is applied should be carefully documented in the policy.

Example: A male employee who has ten years of service is paid more than a female employee who has two years of service. If the employer can explain that difference by pointing to a seniority pay scale based on years of service in either the employer’s policy or in a union contract, then the employer should have a defense to the pay disparity.

Merit System - Just as with a seniority system, an employer must be able to point to a merit system in a pre-existing policy, procedure, or union contract to explain a pay disparity based on merit. If the meritbased pay scale appears in an employer’s policy, the criteria for determining compensation under such a system and how it is applied should be carefully documented in the policy.

Example: An employer in the sales industry has an established system for paying its employees based on commission. A male employee is compensated more than a female employee because the male employee earned more commission due to a higher number of sales. The employer is able to justify the pay disparity by pointing to its pre-established commission-based pay scale. This type of system should be detailed in the employer’s written policies.

The burden of proof is on the employer once the employer shows a pay differential.

Establish the “Bona Fide Factors” Legal Defense. An employer can defend itself from an Equal Pay Act lawsuit if the employer can show that a difference in pay is based on a legitimate difference between the employee in the protected class and the higher-paid employee. This difference must be based on some type of legitimate merit or quality that the higher-paid employee has, and the employee in the protected class does not have, and may include factors such as the higher-paid employee’s greater education, training, experience, production, or quality of work. This defense probably is the most difficult equal pay defense to prove and requires the employer to meet certain criteria, including: The differential must be based on one or more legitimate, bona fide factors, such as the higher-paid employee’s greater education, training, experience, or quality or quantity of production.

Example: An employer pays a male employee with a Master’s Degree more than a female employee with a Bachelor’s Degree.

Factors are not based on legitimate bona fide factors and do not perpetuate a difference in compensation differential based on a protected characteristic.

Example: Paying a male construction worker a higher salary than a female construction worker because the male worker has an accounting degree is not a legitimate factor because an accounting degree has nothing to do with construction work.

Lack of intent or knowledge is not a defense.

Protected Classes Under the NJ Equal Pay Act

The NJ Equal Pay Act is not limited to claims based on gender discrimination; instead, it covers the following protected classes:

• Race • Religion • Color • National origin • Nationality • Ancestry • Age • Sex • Pregnancy • Marital status • Domestic partnership or civil union status

• Affectional or sexual orientation • Gender identity or expression • Atypical hereditary cellular or blood trait • Genetic information • Military service • Mental or physical disability

Potential Monetary Damages for Employers Should employers be found in violation of the NJ Equal Pay Act, the following are potential damages that may be awarded to employees: Back and Front Pay

The employee is entitled to back pay to make up for the past disparity in pay, as well as an adjustment to future pay to ensure equal pay moving forward.

Compensatory Damages

Damages caused by the discriminatory pay difference, such as emotional harm and the cost of seeking another job.

Punitive Damages

The employer must pay additional damages where the employer willfully violates the NJ Equal Pay Act.

Treble Damages

Three times the amount of pay differential damages.

Employers can be liable for back pay stemming back six years. Every unequal paycheck an employee receives is a new violation that restarts the six-year statute of limitations.

Example: Employee proves she was paid $10,000 less per year over the last 10 years. Her damages would be $180,000.

$10,000 x 6 Years* x 3** = $180,000

Proactive Measures Employers Can Take • Conduct a salary audit to assess potentially problematic salary discrepancies.

• Ensure handbook and policies are up-to-date.

• Require a compensation committee make all salary decisions.

• Document the reasons behind all compensation decisions and include references to legitimate indications of merit such as education, training, or experience.

• Define the factors that are to be used in salary decisions and include those factors in written and other materials that are easily accessible to employees, such as an employee handbook and website.

• Implement a seniority system or merit-based system (where appropriate), and include those systems in written employment policies that employees can easily access.

• Consult legal counsel about the suitability of including arbitration agreements with class action waivers in your employment agreements. * six year Statue of limitations ** treble damages provisions

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